TABLE OF CONTENTS
IN-DEPTH:
The Missed Opportunity of Connecting the Dots between the Freedom to Provide Services and the Right of Residence of Posted Third-Country National Workers in SN and Others v Staatssecretaris van Justitie en Veiligheid C-540/22
Pauline Melin
Has the Deutsche Telekom’s Saga come to an end? The Court of Justice confirms European Commission’s duty to pay interest (C-221/22 P)
Guillerme Oliveira e Costa
No automatically recognition required for Member States regarding the refugee status granted in another Member State (C-753/22, QY v Bundesrepublik Deutschland)
Aniel Pahladsingh
The Complex Issue of Judges’ Remuneration and Judicial Independence (Opinion of Advocate General Collins in Joined Cases C-146/23 and C-374/23)
Panagiotis Zinonos
The ‘délit de solidarité’ before the Grand Chamber of the EU Court of Justice Reflections in the Aftermath of the Kinsa Case Hearing (C-460/23)
Stefano Zirulia
‘VA v. Commission’: Clarifications on the Regime of Dependent Child and Education Allowances
Anna Duron
SYMPOSIUM ON THE 2024 REFORM OF THE STATUTE OF THE COURT OF JUSTICE OF THE EU
The Court of Justice appeal filter mechanism and effective judicial protection: throwing out the baby with the bathwater?
Kieran Bradley
Referring cases back to the Court of Justice: faculty or duty?
Dominik Düsterhaus
COMPETITION CORNER: SYMPOSIUM ON SELECTIVITY IN STATE AID
Selectivity and the reference framework: the evolution in the Spanish Goodwill saga
Jacques Derenne & Ana Álvarez Vidal
THE LONG READ:
Republicanism during the EU’s Ninth Legislative Term. Taking Stock with the White Paper on the Future of Europe
Armin von Bogdandy & Michael Ioannidis
HIGHLIGHTS OF THE WEEK
IN-DEPT H
The Missed Opportunity of Connecting the Dots between the Freedom to Provide Services and the Right of Residence of Posted Third-Country National Workers in SN and Others v Staatssecretaris van Justitie en Veiligheid C-540/22
Pauline Melin
1. Introduction
Based on the free movement of services, the Posted Workers Directive applies irrespective of the worker being an EU citizen or a third-country national (Art. 2(1) of the Posted Workers Directive). More than thirty years ago, the Court ruled in Vander Elst (C-43/93) that third-country nationals lawfully and habitually employed in an EU Member State do not require work permits in the other EU Member State where they are posted. Alongside those EU rules on posting, there is no harmonised EU legal framework on residence for posted third-country nationals. The tensions between the freedom to provide services and the (absence of) right to reside in the EU for posted third-country nationals are at the centre of C-540/22 ruled on 20th June 2024.
The applicants are Ukrainian nationals holding a residence permit in Slovakia for the purpose of employment who were posted to the Netherlands by a company established in Slovakia. In accordance with Dutch law, the company then filed for residence permits in the Netherlands on behalf of its workers. The IND, the competent institution for issuing residence permit in the Netherlands, awarded residence permits for a duration equivalent to the posted workers’ residence permits from Slovakia and limited to a maximum of two years. The problem was that the duration of the residence permits was shorter than the duration of the posting activities. The applicants appealed that decision considering that the obligation to apply for residence permits as well as their duration and the accompanying administrative fees were unjustified restrictions to the free movement to provide services under Art. 56 TFEU.
2. No automatic Right of Residence during the Period of Posting
It is not the first time that the Court is asked to rule on residence permits for posted third-country national workers. In Commission v. Austria (C-168/04), the European Commission had argued that, under Art. 56 TFEU, service providers transfer a derived right of residence to their posted workers for the duration of the service. In the Commission’s view, a residence permit for third-country nationals posted workers should be declaratory and not constitutive (C-168/04, paras. 31-32; also repeated by the Commission in this case, see AG Opinion in C-540/22 in point 54). While the Court ruled that an automatic refusal to issue an entry and residence permit in the event of the entry without a visa of a lawfully posted worker was a disproportionate restriction to Art. 56 TFEU, it did not engage into the discussion of a derived or automatic right of residence in Commission v Austria (C-168/04).
In C-540/22, the referring court then asked whether the freedom to provide services entailed that third-country nationals posted workers must automatically be recognised as having a ‘derived right of residence’.
Relying on AG Rantos Opinion, the Court focused its interpretation on transposing the concept of derived right of residence under Art. 21 TFEU concerns to Art. 56 TFEU. The Court considered that the derived right of residence under Art. 21 TFEU applies to relations between family members benefiting from a fundamental right to respect for family and private life under Art. 7 of the Charter. The Court concluded that the same right and relationship is not to be found between an employee and employer (para. 54).
Surely the special bond of dependency required under the EU citizenship case-law (e.g. Chen C-200/02, Ruiz Zambrano C-34/09) on derived right of residence (see further F. Ristuccia 2023) can hardly be compared to the relationship between a posted worker and his/her employer. However, the use of the wording ‘derived right of residence’ regrettably overshadowed the real interesting legal argument – namely that of automaticity between the posting activities and the right of residence.
3. Obligation to obtain a Residence Permit in the Member
State where the Service is provided
Member States are allowed to request a declaration of the posting activities prior to posting in order to verify that the situation of the third-country national is lawful according to previous case-law (e.g. Danieli & C. Officine Meccaniche and Others C-18/17) and Art. 9(1) of the Enforcement Posted Workers Directive. In C-540/22, the referring court doubted whether Art. 56 TFEU precludes the requirement under national law to obtain a residence permit while there is already an obligation to declare the posting activities.
After considering that this additional requirement can be regarded as a restriction to the freedom to provide services (paras. 72-73), most of the judgment and the AG Opinion focused on the potential justifications of overriding reasons of public interests and their proportionality. While the first two justifications were rejected, the third and fourth justifications were upheld by the Court.
The third justification related to the respect for the right of posted worker to legal certainty. That purpose can be linked with the Court’s previous case-law, such as Commission v Germany (C-244/04) where it had held that Member States might require documents proving that workers are posted lawfully including regarding their lawful residence, work authorisation and social security coverage. The fourth justification concerned the need to check that the posted worker does not constitute a threat to public policy. The Court found that the requirement of obtaining a residence permit was appropriate and necessary if refusing residence is only reserved to persons who represent a genuine and sufficiently serious threat to one of the fundamental interests of society (para. 96).
Although those two justification grounds might appear legitimate, the necessity of obtaining a residence permit is less convincing in my opinion. Particularly, a less restrictive measure could have at least been discussed. The one proposed by the Commission to have an automatic right of residence with a possibility for Member State to ask a registration of residence at the municipality (see Commission’s website) could have been an interesting alternative.
If a residence permit is an appropriate means for posted workers to prove that they are not illegally staying in the host Member State (para. 85), surely a registration of residence could achieve the same goal. In the absence of an automatic right of residence for the purpose of the posting activities, obtaining a residence permit is not a simple task contrarily to what the Court seems to suggest in para. 89. As recent reports have shown (Commission report on posted workers 2024, p.11 ; ELA report 2023, p.15), the requirement of obtaining residence permits reinforces the relationship of dependency between the posted third-country national worker and its employer while the former is already particularly vulnerable. Furthermore, as this case demonstrates, it is not a declaratory task since the application for residence permit can be rejected or limited to a period that does not correspond to the duration of the posting activities.
On the need to check the threat to public policy, the Court found that the particular aspect of the residence permit procedure includes the person concerned to report to the premises of a competent authority which may enable the identity of that person to be verified in detail (para. 101). That same purpose could also be achieved through the demand to register residence at the municipality. Furthermore, if the person represents a genuine and sufficiently serious threat, there could still be a ground to withdraw the residence registration and to expulse the person (similarly to the system under Arts. 27 and 28 of Directive 2004/38).
Furthermore, recognition of the Slovak residence permits was not really an option given the current exceptions in EU law. Although the applicants had a single permit (combination of a work and residence permit) in Slovakia through the Single Permit Directive, that permit does not apply to third-country nationals who are posted for as long as they are posted (Art. 3(2)(c) of Directive 2011/98) (paras. 87-88). It should be noted that this exception was kept in the recast Single Permit Directive adopted last month (Art. 3(2)(c) of Directive 2024/1233). Furthermore, Art. 1(2) of Regulation No 1030/2002 on a uniform format for residence permits states that the residence permits are valid only in respect of the territory of the Member State which issued them (paras. 87-88).
4. Duration of the Residence Permit and Associated Fees
Finally, the referring court asked whether Art. 56 TFEU precludes the national law limiting the duration of the residence permit.
The Court held that Member States must be able to determine the period of validity of residence permit for posted third-country nationals since a service under Art. 56 TFEU must be of a temporary nature (para. 113). It was not a restriction to the freedom to provide services since the period of validity does not regulate the conditions for the right of the service providers and its potential restrictive effects are too uncertain and indirect for it to be regarded for being capable of hindering that freedom (para. 116). In other words, the service provider can find other posted workers.
However, the Court adds that such a period of validity should not be manifestly too short to meet the needs of the majority of the service providers or if the renewal of the permit should not be under excessive formal requirements (para. 116). The reasoning of the Court is unfortunately short on this. When is the period of validity
to be considered as ‘manifestly too short’? What are ‘the needs of the majority of the service providers’? Those questions are for a next preliminary ruling request.
On the payment of fees for the application of the residence permit, the Court found that asking fees for the processing of the residence application is allowed however those fees should reflect the work and costs of the administration (paras. 119-121).
5. Concluding Remarks
With this judgment, the Court had the opportunity to connect the missing dots between the freedom to provide services and the right to reside for posted third-country national workers. Undoubtedly, such a connection would not have been an easy one under the current EU legal framework on residence of third-country nationals. Perhaps some will argue that this case was not the best one for legal creativity as, while the case was pending, new applications for residence permits were made and the applicants were granted residence permits for the entire duration of their posting activities (para. 104). Perhaps others will argue that it is not the role of the Court to engage in legal creativity. But given the particularly vulnerable situation of posted third-country national workers (Commission report on posted workers 2024, p.11 ; ELA report 2023, p. 15), one can only regret that the discussion of both the AG and the Court on the right of residence was focused on the comparison with the concept of ‘derived right of residence’ under EU citizenship law without considering alternative arguments for a right to residence based on Art. 56 TFEU.
Melin, P.; “The Missed Opportunity of Connecting the Dots between the Freedom to Provide Services and the Right of Residence of Posted Third-Country National Workers in SN and Others v Staatssecretaris van Justitie en Veiligheid C-540/22”, EU Law Live, 04/07/2024, https://eulawlive.com/op-ed-themissed-opportunity-of-connecting-the-dots-between-the-freedom-to-provide-services-and-the-right-of-residence-of-posted-third-country-nationalworkers-in-sn-and-others-v-staatssecre/
Has the Deutsche Telekom’s Saga come to an end? The Court of Justice confirms European Commission’s duty to pay interest (C221/22 P)
Guillerme Oliveira e Costa
The Grand Chamber of the Court of Justice (‘CJ’ or the ‘Court’), on 11 of June, delivered a judgment where it confirmed the obligation of the European Commission (‘EC’) to pay interest on fines imposed for competition law infringements that are subsequently annulled or reduced by the EU Courts. The judgment confirms and clarifies the case law established by the Court in its previous ruling in Printeos (C-301/19 P) which had departed from the EC’s decisional practice of not paying such interest.
1. Judgment’s background
The judgement has its origins in an EC’s Decision by which Deutsche Telekom (‘DT’) was ordered, in the end of 2014, to pay a fine of around 31 million euros for an abuse of a dominant position on the Slovak market for broadband services. The fine was later reduced by the General Court ( T-827/14) to around 19 million euros. However, at the beginning of 2015, DT provisionally paid the fine in full and in 2019 the EC repaid the 12 million euros difference between the fine imposed and the one confirmed by the General Court.
Even so, DT asked the EC to pay also the interest corresponding to the amount unduly collected for the period from the date of payment of fine to the date of 12 million euros’ repayment (‘the relevant period’). The EC refused this DT’s request, relying on its Delegated Regulation no. 1268/2012 (‘Delegated Regulation’), applicable at the time, that provided for the repayment of the amounts unduly collected together with the interest yielded by their investment, or only the nominal value of those amounts if the return on investment was negative. DT challenged this EC’s Decision before the General Court, which annulled it and ordered the EC to pay damages to DT, calculated by analogy with the default interest rate of 3,5% set by the Delegated Regulation ( T-610/19). The EC appealed against the General Court’s judgment before the CJ, arguing that it had no obligation to pay default interest under EU law and that the General Court had erred in the choice and application of the interest rate.
2. The CJ’s judgment
The CJ dismissed the EC’s appeal in its entirety and upheld the General Court’s reasoning. The CJ reiterated that, under Article 266(1) TFEU, the payment of interest constitutes a measure giving effect to a judgment annulling an EC’s decision, as it is designed to compensate, at a standard rate, for the loss of enjoyment of the amount owed and to encourage the EC to comply with the judgment as soon as possible. The Court also reaffirmed that the payment of interest applies not only to the institutions, bodies, offices and agencies of the EU, but also
to the authorities of the Member States, where sums of money have been received in breach of EU law, as this constitutes the expression of a general principle of recovery of sums paid but not due.
The CJ rejected the EC’s argument that the interest to be paid in such cases should be compensatory rather than punitive, and that it should correspond to the interest yielded by the investment of the fines provisionally paid by the undertakings, in accordance with Article 90 of the Delegated Regulation. The Court then held that the EC’s obligation to repay a fine annulled or reduced by the EU Courts together with interest stems from Article 266 (1) TFEU, which requires the EC to place the undertaking concerned in the situation in which it would have been had it not been deprived of the benefit of the sum corresponding to the amount unduly collected. In sum, it is a matter of preventing an unjust enrichment from the European Union.
The CJ further rejected the EC’s argument that the interest rate applied by the General Court was inappropriate and disproportionate, and that it should be capped at the rate of 1.55%, as provided by Article 83(4) of the Delegated Regulation for cases where the undertaking provides a bank guarantee instead of paying the fine. The CJ endorsed the General Court’s view that the situation of an undertaking that provisionally paid the fine differs from that of an undertaking that provided a bank guarantee, as the latter has not transferred the sum of money to the EC and has not been deprived of its use. The CJ also endorsed the General Court’s view that the interest rate laid down in Article 83(2)(b) of the Delegated Regulation, which applies to ‘all other cases’ of late payment and provides for an interest rate of 3,5%, was not unreasonable or disproportionate for the purpose of compensating the undertaking, and that the EC could not rely on the deterrent effect of the fines to justify a lower rate.
3. Commentary
The Court’s judgment confirms the principle that the EC must pay interest on fines that are annulled or reduced by the EU Courts and clarifies the applicable interest rate in such cases, being an interesting development of the Printeos case-law. The judgment also has implications for the EC’s practice of imposing and collecting fines for competition law infringements, as well as for the undertakings’ rights to effective judicial protection and full compensation. If this practice should have been already reversed since the Printeos judgement, it is unlikely that the EC will now have the leeway to continue not paying interest in situations like this.
The Court’s rebuttal of the EC’s argument that the interest’s payment could undermine the deterrent effect of fines (para. 68) is, probably, one of the best examples of balancing legal interests in this judgement. The Court recognises the role that the imposition of fines can and should play, but rightly points out that this effect must be balanced against the right to effective judicial protection. Thus, the CJ recognises that if an undertaking has been unduly deprived of certain amounts over a period of time, it must be compensated for this by the EC’s payment of interest. The Court further reinforces this matter by pointing out that the EC cannot invoke the deterrent effect of fines in this context when they are fines that have been annulled and, as such and in that proportion, void.
Another interesting remark lies in the fact that the CJ has acknowledged that the reasoning expressed in this judgment also extends to national cases where EU law is applied by authorities of the Member States (paras. 54-
56). Thus, this judgement’s importance is not limited to the EC’s application of competition law but is also relevant to all situations in which national competition authorities condemn undertakings to pay fines for infringing Articles 101 and 102 TFEU.
On the other hand, the Court apparently have established a difference in cases such as these, where an undertaking provisionally pays the fine in full, and others where a bond (e.g. bank guarantee) is provided with the aim of suspending the obligation to pay the fine. In this second situation, the Court seems to have taken the view that it is not up to the EC to compensate the undertaking, insofar as any financial losses are only attributable to the undertaking’s own decision to provide the guarantee in order not to pay the fine (para. 87). The issue may be debatable since the cost of the bond may have been higher because the fine imposed was inappropriately higher. This is an issue that may be clarified in future judgements.
This judgement predictably puts an end to the Deutsche Telekom saga, which is a fine example of how the system of checks and balances works in EU law. The Court both confirms infringements as reduces fines, as well as seeks to effectively protect undertakings’ rights. It is particularly significant to see the detail with which the percentage of interest was also discussed in this case, in order to ensure that DT’s effective jurisdictional protection was properly guaranteed. In times of uncertainty, fills one with hope to see the robustness of the EU’s judicial system.
Guillerme Oliveira e Costa is an associate lawyer of a Competition & EU Law department of a Law firm in Portugal. All opinions are strictly personal.
Oliveira e Costa, G.; “Has the Deutsche Telekom’s Saga come to an end? The Court of Justice confirms European Commission’s duty to pay interest (C221/22 P))”, EU Law Live, 03/07/2024, https://eulawlive.com/op-ed-has-the-deutsche-telekoms-saga-come-to-an-end-the-court-of-justice-confirmseuropean-commissions-duty-to-pay-interest-c-221-22-p/
No Automatic Recognition required for Member States regarding the Refugee Status granted in another Member State (C-753/22, QY v Bundesrepublik Deutschland
Aniel Pahladsingh
On 18 June 2024, the Grand Chamber of the Court of Justice ruled that a Member State is not required to automatically recognise a refugee status granted in another Member State (QY v Bundesrepublik Deutschland (Effect of a decision granting refugee status)) (C-753/22).
As EU law currently stands, Article 78(2)(a) TFEU does not oblige Member States to recognise the refugee status granted by another Member State. Article 33(1) and (2)(a) of Directive 2013/32/EU (Procedure Directive) brings about the possibility for a Member State to reject as inadmissible an application for international protection made by an applicant when ‘another Member State has already granted such protection’. However, the Court of Justice points out that the second Member State must carry out a new individual examination of the application for international protection in order to avoid that applicant potentially facing any inhuman or degrading treatment (Article 4 Charter). The second Member State must take full account of the decision of the first Member State, which issued the refugee status to the applicant, and of the elements on which that decision is based.
Facts and Reference
QY is a Syrian national who obtained refugee status in Greece in 2018. She left Greece and subsequently entered Germany, where she made an application for international protection. An administrative court in Germany held that, due to the living conditions of refugees in Greece, QY faced a serious risk of being subjected to inhuman or degrading treatment, with the result being that she could not return to Greece. By decision of 1 October 2019, the Federal Office in Germany rejected QY’s application for refugee status, but granted her subsidiary protection. QY then brought an action against the refusal to grant refugee status before the German courts. The German Federal Administrative Court asked the Court of Justice whether, in such a situation, a competent authority is required to grant the applicant refugee status solely on the ground that she has already been granted refugee status by another Member State or whether it may carry out a new, independent examination of the substance of that application.
The Ruling: no Automatic Mutual Recognition of Refugee Status
The Court of Justice points out that Article 78(2)(a) TFEU requires the European Parliament and the Council of the European Union to adopt measures for a Common European Asylum System that ‘provides a uniform asylum status for third-country nationals valid throughout the Union’ (QY, para. 58). As Advocate General Medina already indicated, this provision provides a legal basis for the mutual recognition of refugee status for
another Member State (Opinion, point 48). However, the Court points out that, as EU law currently stands, Member States are not required to recognise automatically decisions granting refugee status adopted by another Member State (QY, para. 59). The Court of Justice does indicate that the Member States have the discretion to automatically recognise refugee status from another Member State. In this case, Germany did not exercise that option.
Neither the Procedure Directive nor the Qualification Directive (Directive 2011/95/EU) contain provisions showing that maximum harmonisation is being pursued in which the Member States must recognise each other’s positive asylum decisions. In this context, it is important to point out that Member States are explicitly allowed to apply more favorable standards (see recital 14 and Article 5 of the Procedures Directive, as well as recital 14 and Article 3 of the Qualification Directive) so long as this fits within the context of international protection (see M’Bodj, paras. 42-44) (C-542/13). This proves that the same application for international protection is not necessarily assessed in every Member State on the basis of the same substantive and procedural standards and that there may therefore be differences in the outcome. The consequence is that a Member State cannot be obliged to take over a decision granting international protection and the associated obligations from another Member State.
Furthermore the Communication from the Commission to the European Parliament and the Council towards a reform of the common asylum system and an improvement of legal options. to come to Europe also shows that there is no obligation to recognise the refugee status. This states: ‘In addition, in the longer term, initiatives could be taken to promote mutual recognition of protection granted in different Member States, which could provide the basis for a framework for the transfer of protection.’
Assessment of the Application in the second Member State
The Court reviewed the scope for the second Member State to assess the application for international protection submitted by the applicant to whom another Member State has already granted refugee status. In those circumstances, where the competent authority cannot reject as inadmissible an application for international protection of an applicant to whom another Member State has already granted such protection, for the reason that a serious risk exists that that the applicant will be subjected to inhuman or degrading treatment in that other Member State (Article 4, Charter), it must carry out ‘a new, individual, full and up-to-date examination of the qualification for refugee status’ (QY, para. 74). In the context of that examination, that authority must nevertheless take full account of the decision of that other Member State to grant international protection to that applicant and of the elements on which that decision is based (QY, para. 76). To that end, it must, as soon as possible, initiate an exchange of information with the authority that adopted that decision (QY, para. 78). If the applicant qualifies as a refugee, the authority must grant him or her refugee status, and it does not have any discretion. The importance that an applicant will not face an inhuman or degrading treatment (Article 4 Charter) is also pointed out in the Court’s ruling of 18 June 2024 in Generalstaatsanwaltschaft Hamm (C-352/22), in which it stated that the granting of refugee status in a Member State precludes the extradition of the person concerned to his or her country of origin.
New Asylum and Migration Pact
In September 2020, the European Commission presented the Pact on Migration and Asylum. This pact will create a new legal framework that balances solidarity and responsibility between Member States, in a comprehensive approach to managing migration effectively and fairly. On 11 June 2024, the legal instruments entered into force and will enter into application as of 12 June 2026 with the exception of the Union Resettlement and Humanitarian Admission Framework Regulation, which is already applicable since 11 June 2024.
The Procedure Directive will be revised to become the Procedure Regulation (Regulation (EU) 2024/1348), in which the asylum procedure regulation will streamline the European asylum procedure, and introduces a mandatory border procedure in well-defined cases. In that new regulation, there is also a provision regarding the inadmissibility of an international protection application. Article 38(1), point c, of the new Procedure Regulation contains the inadmissibility ground that ‘a Member State other than the Member State examining the application has granted the applicant international protection’. This provision is similar to the provision in the Procedure Directive. Therefore, it is foreseeable that the ruling of the Court of Justice in this case will also apply under the Procedure Regulation (Article 38(1)(c)), which means that there will be no obligation for mutual recognition of the refugee status for other Member States. However, there are serious reasons to expect that the second Member State will need to take into greater consideration the refugee status issued by the first Member State in the decision. In this context, it is important to point out that in recital 6 of the Procedure Regulation is ‘to harmonise national asylum systems’ in which, according to recital 7, ‘common procedure for granting and withdrawing international protection should limit the secondary movements of applicants for international protection between Member States…’.
Final Remarks
The ruling in QY leaves discretion for the Member State since there is no obligation under EU law for mutual recognition of a refugee status which is granted by another Member State. Under the current Procedure Directive and under the Procedure Regulation, which will be in force on 12 June 2026, the Member State is allowed to reject an application for international protection made by an applicant inadmissible in the situation that another Member State has already granted such protection.
However, the discretion for the Member State is limited as the second Member State must carry out a new assessment on the application for international protection. In this assessment, the second Member State must take full account of the decision of the first Member State which granted the refugees status. The standard or requirement to be met, and for the Court to assess, is that the applicant will not face an inhuman treatment or degrading treatment (Article 4, Charter). This ruling strengthens the legal protection of the applicant in asylum cases.
The asylum procedures, living conditions and reception facilities are worrying in certain EU countries in which refugees or persons with a subsidiary protection status will face serious risks of being subjected to inhuman or
degrading treatment (Article 4, Charter), such as in Greece. Therefore, persons with a permit for international protection (refugee status or subsidiary protection) leave such EU Member States to enter other countries in the EU where there are adequate facilities. It is important that the EU will invest more in Member States where there are serious problems with the asylum procedures, living conditions and reception facilities in order to improve the living conditions and reception facilities in all Member States so that there is no infringement of Article 4 of the Charter. This will reduce such secondary flows of persons with a residence permit for international protection within the EU.
Aniel Pahladsingh is a senior lawyer at the Legal Affairs Department at the Ministry of Social Affairs and Employment (Nl) and deputy judge at the District Court in Rotterdam (Administrative Law section). He has written several articles and books in the area of asylum, migration and fundamental rights in the EU.
Pahladsingh, A.; “No automatically recognition required for Member States regarding the refugee status granted in another Member State (C-753/22, QY v Bundesrepublik Deutschland)”, EU Law Live, 05/07/2024, https://eulawlive.com/op-ed-no-automatically-recognition-required-for-member-statesregarding-the-refugee-status-granted-in-another-member-state-c-753-22-qy-v-bundesrepublik-deutschland/
The Complex Issue of Judges’ Remuneration and Judicial Independence (Opinion
of Advocate General Collins
in
Joined Cases C-146/23 and C-374/23)
Panagiotis Zinonos
Advocate General Collins delivered his Opinion in Joined Cases C-146/23 and C-374/23 on 13 June 2024 and analysed them as the opportunity for the Court to revisit and expand its existing case law on judges’ remuneration in light of the principles of judicial independence and effective judicial protection (para. 2). The Portuguese judges case marked the beginning of a still-evolving case law on the legal value of EU values and allowed the Court to clarify the content of the EU standard of judicial independence with particular focus on the adequate remuneration of judges. The Portuguese judges case established that, as a matter of EU law, judges are not immune from reductions in their remuneration when such reductions are justified, not targeted, temporary and limited in nature. However, it did not clarify the specific role of the legislature and the executive in the process of determining judges’ remuneration as it did not address the characteristics of an appropriate remuneration regime for judges.
AG Collins’ Opinion offers a workable and fair response to the preliminary questions, considering the respective roles of the three powers, the broader constitutional landscape of the EU and the competence constellation of its legal system. Yet, the overall convincing reasoning suffers from the unsatisfactory articulation between the national and the EU legal systems and therefore fails to provide a systemic response to systemic threats regarding guaranteeing judicial independence in light of judge’s remuneration regimes. Despite its undisputable merit of allowing to identify systemic caveats in the articulation of the national and the EU’s legal systems regarding guarantees of judicial independence pertaining to adequate judges’ remuneration, AG Collins’ Opinion cannot be expected to redress such caveats.
The Opinion was drafted in the context of two preliminary references, one from Poland and another from Lithuania, concerning national reforms negatively affecting the remuneration of judges. In case C-146/23, a Polish judge is contesting salary reductions from July 2022 to January 2023. The judge’s remuneration was not calculated according to the Law on the Organization of Ordinary Courts, based on the average salary of the previous year, but rather through specific annual provisions implementing the national budget. The preliminary reference seeks to clarify whether Articles 2 and 19(1) TEU, and Article 47 of the Charter preclude national legislation that limits government spending by removing objective criteria for setting judges’ pay, resulting in sustained pay cuts. In case C-374/23, two Lithuanian judges are suing their government for damages, claiming their salaries are influenced by political decisions, thus violating judicial independence. The referring court notes that nominal salaries have decreased due to tax reforms, without considering inflation. Additionally, the Lithuanian court observed a significant disparity between judges’ salaries and the higher maximum hourly fees for lawyers (€179.90
for lawyers versus €20 for judges). The preliminary questions seek whether Articles 2 and 19(1) TEU grant legislative and executive powers unrestricted discretion to set judges’ salaries, and whether Article 19(1) TEU and Article 47 of the Charter allow national laws to set judges’ salaries below those of other legal professionals. Both requests are discussed here and the Grand Chamber hearing here
I. Systematising the (EU) rules applicable to judges’ remuneration regimes
The Opinion has the merit of recalling the procedural and formal setting of the debate regarding judges’ remuneration and the guarantee of judicial independence from the perspective of the EU common legal system. Questions on the organisation of national judicial systems regarding judges’ remuneration are in principle admissible as EU law is applicable in that area. While the Lithuanian government raised a plea of inadmissibility on grounds of ‘exclusive constitutional discretion of the state and its institutions’ regarding the system for the remuneration of judges, AG Collins pedagogically reiterated that despite the exclusive competence of Member States regarding the organisation of their justice systems, the exercise of that competence must comply with EU law (point 37), in particular with provisions giving concrete expression to the common values enumerated in Article 2 TEU, which the Court has previously qualified as part of the very identity of the EU
The Opinion also recalls the genuinely systemic articulation of provisions pertaining to effective judicial protection and judicial independence. AG Collins admits the absence of implementation of EU law in the sense of Art. 51(1) of the Charter, in the given case and the subsequent inapplicability of Art. 47 thereof. However, he relies on the process of concretisation of the value of the rule of law contained in Art. 2 TEU, through Art. 19 TEU and Art. 47 of the Charter, to suggest that each provision shares, at least in part, the content of the others (point 44). Because of this process of concretisation, and following previous case law, AG Collins predictably considers unnecessary to interpret Art. 2 TEU alone.
II. Legal pluralism versus a cohesive standard of judicial independence
Throughout the Opinion, the pluralistic features of the EU legal system, regarding the variety of national judges’ remuneration regimes, raise difficulties for a coherent analysis of the EU standard of judicial independence. At no point AG Collins criticises the pluralistic landscape of the EU regarding ‘different political and constitutional structures and traditions’ that lead to considerably variable roles for the ‘actors involved in determining the level and elements of judges’ remuneration’ (point 46). However, the practical complexity of articulating the general requirements of EU and international law, with purely national requirements stresses the risk of analysing specific features of a given remuneration regime as fully compliant with national standards while undermining guarantees of corresponding EU and international standards.
The minimal requirements that AG Collins mentions in his Opinion, inspired by the Council of Europe and the UN standards, require ‘that the level of judges’ remuneration is commensurate with the importance of their functions’ and based on ‘relevant, objective and verifiable criteria’. Not only the identification of such criteria is highly uncertain, but the definition of what is commensurate with the importance of functions raises serious
questions considering the financial disparities of Member States. Thus, a pluralistic understanding of specific guarantees pertaining to judges’ remuneration leads either to the necessity of EU and international standards to bend when incompatible with national specificities, or to the conclusion that EU law requirements are not pluralistic and they only provide more or less open-ended choices for defining the relevant, objective and verifiable criteria applicable to judges’ remuneration.
III. Quasi-harmonised aspects of judges’ remuneration regimes
Wage levels, including minimum wage levels for judges, are not harmonised in the EU (point 49). However, when evaluating national rules applicable to judges’ remuneration, AG Collins refers to a legal framework that Member States need to lay down to ensure transparency, objectivity, and legal certainty (point 47). Such a framework needs to be based on relevant, objective, and verifiable criteria, free from discriminatory biases and conforming to the principle of proportionality. National socioeconomic context or general rules applicable to all public office holders also influence this exercise. The apparently broad and vague phrasing of the EU law requirements regarding rules on judges’ remuneration becomes more specific concerning the judicial control of such rules, which is an absolute requirement (point 47).
Judicial control, both at the national and EU levels, can transform the above-mentioned aspects of the EU standard on judges’ remuneration from programmatic statements, implemented with a broad margin of appreciation (point 49), into concrete tools that shape specific criteria and methodologies to evaluate the level of judges’ remuneration considering given objectives. This remuneration must be commensurate with the importance of a judge’s function and able to ‘attract, retain and motivate persons of high moral integrity from diverse backgrounds having the necessary professional qualifications and/or experience’ (para 50) to become and remain judges. Every time national judges or the Court of Justice evaluate specific rules on judges’ remuneration, they are empowered to constructively develop the content of the above-mentioned requirements in light of those broad objectives, leading to more or less convergence. This process can manifest the dynamic evolution of what is comprised within the standard of judicial independence. Also, it is worth noting that convergence is not a farfetched aim. The existence of a Polish constitutional ruling in the context of case C-146/23 declaring the contested national measures unconstitutional (point 55) is tangible proof.
IV. Economic aspects of judicial independence
Despite its appearance of good compromise, AG Collins’ Opinion relies on a surprising premise: the possibility to balance aspects of judicial independence pertaining to judges’ remuneration with financial concerns.
Firstly, there is an uneasy attempt to link judges’ remuneration with regulated lawyers’ fees without directly comparing them (point 52). AG Collins argues that judges, as public servants, enjoy job security and stable pay without commercial risks, costs, or VAT, and are paid consistently, while lawyers often face delayed and unpredictable payments. Although this reasoning is sound, in the Lithuanian context, where lawyers earn up to nine times more (point 26), it might have been better to emphasise the link between judges’ pay and lawyers’ fees
rather than the latter’s commercial costs. This approach could mislead on the parameters affecting the assessment of what level of remuneration is commensurate with the functions of a judge.
Secondly, the Opinion attempts to avoid discriminatory or disproportionate reductions of judges’ salaries but admits without any specific assessment the idea that financial constraints justify such reductions (points 49, 60, 62-64). Admitting reductions to judges’ remuneration to prevent excessive deficits (point 60) is difficult, especially considering the Court’s case law rejecting economic reasons for restricting EU internal market rules. The inconsistency of that case law in some instances does not diminish the paradox of accepting such justifications for potential hindrances to the EU standard of judicial independence. Nonetheless, it is important to stress that AG Collins did not decide whether salary reductions are violating EU standards and acknowledged that the final decision rests with the national judges (points 61 and 65).
Conclusion
AG Collins’ Opinion highlights the complexity of judicial independence and the need for judges’ remuneration to reflect reality. However, a more coordinated approach among Member States is essential to define formulas for calculating minimum wages for judges. In the meantime, the Court could already clarify less contentious aspects, such as the specific criteria for evaluating national rules on judges’ remuneration under EU law.
Panagiotis Zinonos is a Référendaire de Justice at the Luxembourg Supreme Court. All opinions are strictly personal. His latest article discusses the systemic relations between national legal orders and the EU legal order in the context of the EU’s own legal identity.
Zinonos, P.; “The Complex Issue of Judges’ Remuneration and Judicial Independence (Opinion of Advocate General Collins in Joined Cases C-146/23 and C-374/23)”, EU Law Live, 02/07/2024, https://eulawlive.com/op-ed-the-complex-issue-of-judges-remuneration-and-judicial-independence-opinion-of-advocate-generalcollins-in-joined-cases-c-146-23-and-c-374-23/
The
‘délit
de solidarité’ before the
Grand Chamber of the EU Court of Justice Reflections in the Aftermath of the Kinsa Case Hearing (C-460/23)
Stefano Zirulia
The question for a preliminary ruling: whether European and national rules on countering the facilitation of irregular immigration complies with the Charter
On 18 June 2024, the Grand Chamber of the Court of Justice heard oral arguments in the Kinsa case (formerly Kinshasa, C-460/23). The Court is called to rule on a question for preliminary ruling (Article 267 TFEU) raised by the Italian Tribunal of Bologna concerning the compatibility between European and national legislation on countering the facilitation of irregular immigration and the Charter of Fundamental Rights (hereinafter CFR). The Italian judge argues that the obligation to criminalise any form of facilitating irregular entry of aliens, even if carried out for non-profit purposes, imposed on Member States by the combination of Article 1(1)(a) of Directive 2002/90/EC and Article 1(1) of Framework Decision 2002/946/JHA (often jointly referred to as the Facilitators Package), is not compatible with the principle of proportionality enshrined in Article 52(1) CFR. In the Tribunal’s view, in fact, such a broad scope of the criminalisation, accompanied by the mere faculty to provide a justification for humanitarian assistance (Article 1(2) of the Directive), represents a disproportionate limitation on the exercise of a number of fundamental rights under the Charter. Firstly, the rights to personal liberty, reputation, and property of those accused of humanitarian assistance, who risk being subjected to prison sentences and fines, as well as preventive measures such as arrest or seizures. Secondly, the rights to life, physical integrity, asylum, and family unity of undocumented migrants, which may be compressed by the chilling effect that the criminalisation of humanitarian activities spreads in civil society. Identical doubts are expressed by the Tribunal with reference to the Italian legislation transposing the Facilitators Package, i.e. Article 12 of the Immigration Consolidated Act (hereinafter ICA).
The position of the European Commission and some counterarguments
At the GC hearing, the European Commission supported an interpretation of Article 1(1)(a) of Directive 2002/90/EC aimed at sidestepping the conflict with the Charter highlighted by the national judge. According to the Commission, the question should be reformulated in the light of the circumstances of the specific case, in which a Congolese asylum-seeking woman is accused of having attempted to bring her daughter and her nephew, both minors, into Italy with false documents. The Commission’s argument is that the Facilitators Package does not oblige Member States to criminalise the conduct of a foreigner who illegally enters one of their territories together with the foreign minors for whom she or he is responsible: the act of facilitating requires in fact a
relationship of otherness/thirdness between the facilitator and the facilitated person, a relationship that – in the Commission’s opinion – does not exist between a parent and a child, nor more generally between an adult and a minor entrusted to him/her. In addition, this interpretation is put in line with the Charter, as it shall prevent any disproportionate limitation on the exercise of the rights to family life and the rights of the child enshrined in Articles 7 and 24 CFR.
The Commission’s arguments are not convincing. Indeed, they fail to confront the wording of Article 1(1)(a) of the Directive, which undeniably describes the offence as any form of voluntary facilitation of irregular entry, without excluding that made on behalf of one’s own family members and/or minors. Evidence of this is, first of all, the fact that some States (in particular, Spain, Belgium, Finland) have felt the need to exercise the option provided by Article 1(2) of the Directive itself, by providing humanitarian justifications. Secondly, the fact that the drafters of the Palermo Protocol of 2000 included among the elements of the notion of migrant smuggling the purpose of profit (Articles 3 and 6), and they did so, as is explicitly stated in the preparatory works, in order to avoid criminalising the aid of family members, which would otherwise have fallen under the concept of aid to illegal entry (see Travaux Préparatoires, p. 469). Lastly, proof of this is the fact that in Member States – such as Italy – that have not introduced a humanitarian justification, aid to family members, including minors, is criminalised precisely on the basis of the criminal laws adopted to implement the Facilitators Package. As the case of the Congolese woman demonstrates, the Italian legislation allows the arrest of the parent who attempts to irregularly introduce the child, as well as the aunt who attempts to irregularly introduce her niece, and results in criminal proceedings being initiated against her, with initial separation of the family unit. It matters little, from this perspective, what the outcome of the trial will be: as already noted by the Court of Justice (Commission v. Hungary, C-821/19, paras. 106-108), on the one hand, over-criminalisation can be assessed at an abstract level, on the basis of the criminal law’s scope; on the other hand, the burden of human suffering and social stigmatisation produced by the investigation and trial represent per se concrete forms of criminalisation.
The arguments of the Council and Hungary and their criticalities
The Council tried to argue the compatibility of the Facilitators Package with the Charter, based on arguments similar to those put forward by Hungary. In summary, they argued that the Directive contains minimum criminal standards, addressed to States and not to individuals, and that it is up to States to implement the European provisions in accordance with the Charter, if necessary by introducing humanitarian justifications.
Such an argument leads to the paradoxical conclusion that the Union can issue directives which are incompatible with the Charter, leaving it to the States to correct the defects when transposing them. In reality, the first addressees of the obligations enshrined in the Charter are precisely the European institutions, even when they enact legislation addressed to the States.
In this regard, it must be emphasised that the criminalisation obligations dictated by directives already contain a certain degree of balancing of interests and are therefore subject to the proportionality test. The Facilitators
Package’s obligation to criminalise any form of assistance to irregular entry is completely unbalanced in favour of border protection. Unlike Article 27 of the Schengen Convention (repealed by the Package) and unlike the Palermo Protocol, the Package precludes States from taking into account the purpose pursued by the facilitator, leaving them the option as to whether criminalising or not humanitarian assistance. Insofar it disregards the other counter-interests at stake, which are recognised as fundamental rights by the Charter, such criminalisation is inherently disproportionate within the meaning of Article 52(1) CFR, regardless of how it is implemented at national level.
The inconsistency of Italy’s arguments
Italy attempted to argue that the Italian criminal law provisions implementing the Facilitators package do not entail any risk of overcriminalisation. The opposite is true: firstly, because Italy has provided for a humanitarian justification which is applicable only to the assistance provided to foreigners who are already in the national territory (Article 12(2) ICA), not to assistance carried out at the borders; secondly, because the Italian rules on necessity (Article 54 of the Penal Code) are very restrictive, applying only in cases of imminent danger of serious harm to a person, requirements that are not necessarily met in all circumstances of humanitarian aid; finally, because in the event of an asylum application filed by the facilitator and/or the facilitated person, a stay of the criminal trial is provided for the misdemeanour of irregular immigration (Article 10-bis ICA), which has nothing to do with the Facilitators package, but not for the different, and more seriously punished, crime of facilitating irregular immigration (Article 12 ICA).
Concluding remarks: the irremediable disproportionality of the Facilitators package
The weakness of the arguments brought by the institutions in support of the legitimacy of the discipline under examination reflects the strength of the arguments brought, in support of its illegitimacy, by the referring judge and the defence attorney of the Congolese woman accused of aiding and abetting.
In fact, as I have more extensively argued elsewhere (see Zirulia 2024, 2023), the Facilitators Package not only appears too vague, in contrast with the principle of legality set out in Article 49(1) CFR; but above all it fails three of the four tests composing the judgement of proportionality under Article 52(1) CFR.
On the one hand, if one considers the Package to be aimed at combating international smuggling networks, its extensive scope is not justified on the level of necessity: it would in fact have been sufficient, for the legislature, to criminalise the assistance for profit, and/or to provide a mandatory humanitarian justification. From the same perspective, the suitability (or appropriateness) test also fails, because the overcriminalisation leads to a waste of human and economic resources that undermines the repression of the most serious courses of conduct.
On the other hand, if one considers, according to the Directive’s wording, that the Package is also meant to fight against occasional assistance and assistance with a humanitarian purpose, then it is the proportionality test in the strict sense that fails: the hierarchy of interests at stake, established by supra-legislative instruments (above all, the
Charter), prevents defending borders to the point of making them prevail, unconditionally, over the fundamental rights to life, physical integrity, asylum and family unity of undocumented people on the move.
Stefano Zirulia is associate professor of criminal law at the University of Milan. His main area of research is in the relationship between criminal law and fundamental rights, with a special focus on immigration criminal law. He is the author of several articles and blogposts on the topic, including a monograph on migrant smuggling and facilitating irregular migration (‘Il favoreggiamento dell’immigrazione irregolare. Tra overcriminalization e tutela dei diritti fondamentali’, Giappichelli, 2023).
Zirulia, S.; “The ‘délit de solidarité’ before the Grand Chamber of the EU Court of Justice Reflections in the Aftermath of the Kinsa Case Hearing (C-460/23)”, EU Law Live, 01/07/2024, https://eulawlive.com/op-ed-the-delit-de-solidarite-before-the-grand-chamber-of-the-eu-court-of-justice-reflections-in-the-aftermath-ofthe-kinsa-case-hearing-c-460-23/
‘VA v. Commission’: Clarifications on the Regime of Dependent Child and Education Allowances
Anna Duron
Introduction
On 5 June 2024, the fifth Chamber of the General Court (GC) in Extended Composition dismissed in part the action for annulment brought by an official of the Council of the European Union (Applicant), against the Commission, acting as the Authority responsible for managing and liquidating the individual pecuniary rights (PMO) of the staff of the Council in the VA v. Commission case ( T-123/23).
The Applicant notified the PMO on 16 September 2021 of the end of studies of his daughter, for whom he had received dependent child and education allowances as well as a tax abatement associated with the former allowance. His daughter sat her last exam on 18 June 2021 and was notified that she had passed on 2 July 2021. The academic year ended on 13 September 2021.
On 24 September 2021, the PMO informed the Applicant that in light of his declaration, the financial entitlements linked to his daughter’s studies would be cancelled retroactively from 1 July 2021.
The Applicant challenged the decisions of the PMO to retroactively terminate his entitlement to the allowances and tax abatement from 1 July 2021 and to recover the amounts unduly paid from that date.
In dismissing in part the case, the GC has brought additional welcomed clarity regarding the end of the regime of dependent child and education allowances.
Autonomous Interpretation of the Notion of Training and Completion of Studies
The main issue in the case was to determine the date on which the Applicant’s daughter completed her studies, which would mark the end of the Applicant’s entitlement to the family and education allowances as well as the related tax abatement.
According to Articles 2 and 3 of Annex VII to the Staff Regulations of Officials of the European Union (the legal framework applicable to officials and agents) (the Staff Regulations), a staff member with one or more dependent children is entitled to a monthly allowance for each dependent child and an education allowance for each dependent child aged at least five and attending a full-time and regular educational establishment. The allowance for dependent children is granted automatically for children under 18 and upon a reasoned request for children aged 18 to 26 who receive school or vocational training.
The education allowance is granted under the conditions laid down by the general implementing provisions of Article 3 of Annex VII to the Staff Regulations and ceases at the end of the month in which the child completes his or her studies or reaches the age of 26, whichever is earlier.
The Commission considered that the relevant date was the date of the last examination, namely 18 June 2021. The Applicant argued that, on the contrary, the relevant date was the end of the academic year, which was 13 September 2021, or at least the date of receipt of the certificate of success, which was 27 August 2021. Alternatively, he claimed that the relevant date should be the date of notification of the results of the final examinations, which was 2 July 2021.
The GC rejected the arguments of both parties and adopted its own interpretation of the notion of completion of studies for the purposes of Articles 2 and 3 of Annex VII to the Staff Regulations. It thus held that a ‘training’ consists of several steps, such as attending the courses provided by the study programme and the examinations relating to those courses, the evaluation of those examinations and, following the last of those examinations, the provision by the educational establishment of the final results certifying the success of that training.
It concluded that a student can be considered as no longer receiving training within the meaning of Article 2(3)(b) of Annex VII to the Staff Regulations from the moment when the final results are made available by the educational establishment. It also transposed this interpretation to the condition of regular and full-time attendance of an educational establishment within the meaning of Article 3(1) of Annex VII to the Staff Regulations for the granting of the education allowance.
The GC clarified rather importantly that its interpretation applies, irrespective of whether the child may still enjoy student status according to the University’s rules or under domestic law.
Applying this interpretation to the facts of the case, the GC found that the final results of the staff member’s daughter’s training were made available by the university as from 2 July 2021, the date on which she could also download a certificate of success.
It concluded that, until 2 July 2021, the Applicant’s daughter had to be regarded as receiving training and attending regularly and full-time the educational establishment providing her training. Thus, the PMO had erred in law in refusing to grant the Applicant the dependent child allowance for the month of July 2021, but was right to refuse him that allowance for August and September 2021.
Responsibility of the official
The GC recalled that it is the official’s responsibility to inform the administration of the end of his/her child’s education by notifying it without delay of the date on which the final results were made available by the educational establishment, so that the administration can immediately stop payment of that allowance.
No breach of the principle of equal treatment
The Applicant had alleged a breach of the principle of equal treatment, in so far as his daughter would have been discriminated against, in comparison with the child of an official who would need to re-sit exams and therefore still benefit from allowances.
The GC found that, contrary to the Applicant’s assertion, there could be no breach of the principle of equal treatment: indeed, the legal situation of his daughter having succeeded in her exams on 2 July 2021, is not comparable with that of an official’s child who should resit his exams.
In the first case, the student may already be regarded as having completed his or her education, whereas in the second, the student will continue his or her education and undergo new tests before he or she can complete his/ her education.
Conclusion
The VA v. Commission judgment provides helpful guidance to those benefiting from allowances pertaining to the Staff Regulations, to anticipate when such benefits should end, and what financial consequences may ensue.
Anna Duron is an Avocat at the Paris Bar.
Duron, A.; “VA v. Commission’: Clarifications on the Regime of Dependent Child and Education Allowances”, EU Law Live, 02/07/2024, https://eulawlive.com/analysis-va-v-commission-clarifications-on-the-regime-of-dependent-child-and-education-allowances/
SYMPOSIUM
SYMPOSIUM ON THE 2024 REFORM OF THE STATUTE OF THE COURT OF JUSTICE OF THE EU
The Court of Justice appeal filter mechanism and effective judicial protection: throwing out the baby with the bathwater?
Kieran Bradley
The institution of independent boards of appeal for Union regulatory agencies was intended to provide a cheap and speedy means of resolving disputes involving complex technical issues between the agencies and parties affected by agency decisions, and thereby improve the protection of their legal rights under Union law. The Court of Justice appeal filter mechanism cuts off, other than in very exceptional circumstances, the possibility of an appeal to that Court regarding the validity of agency decisions; as a result, the appeal board exercises in effect the function of a first instance court, with the sole possibility of an appeal to the General Court. Whatever the practical advantages of this scheme, certain design features of existing boards might be seen as undermining their claim to independence, as illustrated by the ACER Regulation. It is therefore suggested that the provisions governing such boards of appeal include common minimum guarantees as regards their composition, and the appointment and dismissal of their members, in line with the Court’s general case law on the right to effective judicial protection.
The appeal filter mechanism
The 2024 reforms of the Statute of the EU Court of Justice extend the filter mechanism of Article 58a of the Statute to six regulatory agencies which enjoy autonomous decision-making powers. Under this mechanism, an appeal to the Court of Justice from a decision of the General Court concerning the validity of a decision of the independent board of appeal (‘Board’) of such an agency will only be examined by the Court of Justice if it raises ‘an issue that is significant with respect to the unity, consistency or development of Union law’, that is, a matter of exceptional legal importance.
Under old case law, Boards are not considered ‘tribunals’ because they may substitute their appreciation on substantive matters for that of the supervised agency, under the doctrine of ‘continuity of function’ (Procter and Gamble, T-63/01, para. 21), rather than exercising judicial review powers strictly so called. More recently, however, the General Court has intimated that, as well as ‘limit[ing] litigation before the EU Courts’, Boards are intended to ensure ‘an effective remedy for the purposes of Article 47(1) of the Charter’ (Germany v ECHA, T-755/17, paras. 56 and 57).
The Court of Justice has provided a sweeping overview of common characteristics of such Boards: they ‘provide EU agencies with review bodies where they have been given decision-making powers on complex technical or scientific issues capable of directly affecting the legal situation of the parties concerned … these are administrative revision bodies, which are internal to the agencies. They have a certain independence, and
are composed of lawyers and technical experts, which means that they are better able to dispose of appeals against decisions which often have a strong technical component … they are a quick, accessible, specialised and inexpensive mechanism for protecting the rights of the addressees and persons concerned by [agency] decisions’ (Aquind, C-46/21 P, paras. 57 and 59).
The ‘right to appeal’ for individuals in Union law and the upgrading of boards of appeal
The foundational premise on which the General Court was established is that, with respect to ‘actions requiring close examination of complex facts’, the individual or company should benefit from two degrees of judicial protection (Council Decision 88/591, 2nd and 4th ‘whereas’). By restricting the right of appeal to the Court of Justice to matters of exceptional legal importance, the Boards are in effect performing the role originally envisaged for the General Court or, if one existed, a competent specialised Union court.
The shifting of responsibility for first-tier judicial protection to Boards is confirmed by the fact that the statutory criteria for the admissibility of appeals concerning their decisions are essentially similar to those for the review of General Court appeal decisions under Article 256(2) TFEU, with the additional possibility of admitting an appeal where the development of Union law is at issue. While the Boards become in practice, if not in law, part of the EU judiciary, against whose decisions a single level of appeal lies, their members do not enjoy guarantees equivalent to those the Treaty offers judges and Advocates General.
Quis iudicat?
Given that the Boards are appointed by, and function as an integral part of, the Union body, or bodies (the three European Supervisory Authorities, ‘ESA’, share a single Board), they are set up to supervise, some form of rule or mechanism might be expected to avoid a closed circle, whereby the agency is in practice supervising itself. This is not necessarily the case.
The Board at issue in Aquind was that of the EC Agency for the Cooperation of Energy Regulators, ‘ACER’, based in lovely Ljubljana. The Board is an integral part of the Agency (Regulation 2019/942, Article 17(d)). Though not agency staff, its six members are ‘selected from among current or former senior staff of the regulatory authorities, competition authorities or other Union or national institutions with relevant experience in the energy sector’ (Article 25(2)).
The ACER Board could therefore in principle be comprised entirely of ‘current … senior staff of the regulatory authorities’, notwithstanding the fact that those regulatory authorities may be parties before the Board (eg. E-Control v ACER, T-63/16) and that its decisions almost necessarily impact the positions and policies of one or other authority.
The appointment procedure for the ACER Board does little to assuage any such concerns. Members are ‘formally appointed by the Administrative Board, on a proposal from the Commission, following a public call for expression of interest, and after consulting the Board of Governors’ (Article 25(2), 2nd). There is nothing to prevent the
Commission proposing a list of candidates composed exclusively of staff of the national regulatory authorities. It is unclear whether the participation of the Administrative Board and the Board of Governors provides either of these bodies with any real input, but in any case they may have no objection to a system which allows regulators to supervise the Agency.
There also is no requirement that the ACER Board count any lawyers amongst its members, notwithstanding the blithe assertion to the contrary of the Court of Justice (Aquind, para. 59) and certain academics. The rules on dismissal of a Board member do not reserve any role for the other Board members; the existence of ‘serious misconduct’ is decided by the Administrative Board after consulting the Board of Regulators.
CETA criteria NOW!
It is not suggested that the extreme scenario adumbrated above has occurred or is likely to do so. Indeed, the ACER Board was chosen as an example in part because of the author’s personal acquaintance with three of the five members of the current Board listed on ACER’s website; any hint that these eminent lawyers are anything but entirely independent of the agency would be laughable.
That said, formal guarantees of the independence and impartiality of those exercising judicial review functions exist precisely to safeguard against extreme scenarios, and to ensure justice is seen to be done. In other contexts, the Court has held that Article 47 Charter requires rules ‘to dispel any reasonable doubt in the minds of individuals as to the imperviousness of [a judicial] body to external factors and its neutrality with respect to the interests before it’ (CETA Opinion, para. 204). Moreover, the filter mechanism of Article 58a is predicated on the Boards being ‘independent’ in a judicial sense, rather than benefiting from ‘a certain independence’ of the kind the agency Director enjoys. Whatever the practice, the current design of certain Boards does not provide the necessary guarantees of independence and impartiality.
In order to maintain the promise of a second degree of judicial protection, it would be necessary to ensure the first degree includes a judicial component, by requiring the presence in the Board of legal expertise at an appropriate level, along with the appropriate technical knowledge. The rules on the composition of Boards should provide that its members are not, or not exclusively, drawn from the entities being supervised. The ESA Joint Board, for example, already excludes from its membership ‘current staff of the competent authorities or other national or Union institutions or bodies involved in the activities of the Authority’. Moreover, both candidate members and sitting members of the ESA Board may be invited to testify before the European Parliament, which is a welcome element of democratic accountability. The relevant rules should also grant Board members a decisive say in the dismissal of one of their own. Where appropriate for the proper functioning of the internal appeal system, consideration could be given to abandoning the ‘continuity of function’ which was largely responsible for Boards not being considered ‘tribunals’; this is already the case for the ACER Board.
The practical advantages of a system of specialist review of agency decisions, as outlined in Aquind, are obvious. They should not, however, be allowed to trump the requirements of effective judicial protection.
Kieran Bradley is Vice-President of the Administrative Tribunal of the Inter-American Development Bank; Judge of the Administrative Tribunal of the IMF; former judge of the EU Civil Service Tribunal; Senior Emile Noel Global Fellow 2023-2024, NYU School of Law. Thanks to anonymous commentator.
Bradley, K.; “The Court of Justice appeal filter mechanism and effective judicial protection: throwing out the baby with the bathwater?”, EU Law Live, 01/07/2024, https://eulawlive.com/the-court-of-justice-appeal-filter-mechanism-and-effective-judicial-protection-throwing-out-the-baby-with-thebathwater/
Referring cases back to the Court of Justice: faculty or duty?
Dominik Düsterhaus
Quite frankly, I did not think it would take 1500 words to assess whether the General Court may or must refer a given preliminary ruling question back to the Court of Justice. In claris non fit interpretatio it seemed to me or, as follows from the Court’s case law, where the wording of an EU law provision is clear and precise, its contextual or teleological interpretation may not call into question the literal meaning of that provision. And what I read in the Treaty is clear indeed:
‘Where the General Court considers that the case requires a decision of principle likely to affect the unity or consistency of Union law, it may refer the case to the Court of Justice for a ruling [Article 256(3) TFEU]’.
But to stop there would be an incomplete answer for three reasons.
First, lawyers know that while a may is not normally a must, it can still become one. In judicial practice, reasons of equity may rule out all but one of the legally sound solutions just as well as considerations of consistency[1] can command the continuation of a line of reasoning despite plausible arguments to the contrary. Most importantly, the discretion granted by a may is usually framed, even bounded, by the terms and objectives of the provision it forms part of. So even though the wording of Article 256(3) TFEU appears to grant the General Court both a margin of appreciation with regard to the existence of the composite condition of (1) requiring a decision of principle (2) likely to affect the unity or consistency of Union law and discretion as to the ensuing course of action, ie to refer back or not, neither one is boundless. The may indeed becomes a must, I submit, where the General Court considers the composite condition to be met. It remains to be seen how often references in the six ‘clearly defined and sufficiently separable’ areas falling within the General Court’s competence require a decision of principle likely to affect the unity or consistency of Union law. Both parts of this condition provide food for thought and speculation. As regards the requirement of a ‘decision of principle’ it has thus been submitted that it necessarily involves abstract rather than factual interpretation, the latter remaining within the General Court’s competence. While I agree that a ‘decision of principle’ for the purpose of Article 256(3) TFEU will usually relate to abstract interpretation, it would unduly curtail the General Court’s full competence in the areas concerned to reserve issues of abstract interpretation for the Court of Justice. In any event, the second requirement of the composite referral condition, ie the affectation of the unity or consistency of Union law, should serve as a safety valve in this respect.
The Court’s decisional practice in review proceedings under Article 256(2) TFEU and in respect of requests for appeals to proceed (Article 58a of the EU Court of Justice’s Statute) already underscores that a strict application of the conditions under which the unity or consistency risk to be affected – requiring, in essence, that rules, principles or concepts ‘applicable regardless of the subject matter of the case’ are at stake – severely limits the
number of pertinent cases. Mutatis mutandis, one can expect only a small number of cases being referred back to the Court of Justice.
After all, a precondition for the initial transfer of a case to the General Court is that it does not touch upon other fields than the 6 and raises no important interpretative issues of international or primary law including general principles and the Charter. Also, as the Court noted in its request, out of a total of more than 630 cases closed in these fields between 2017 and 2022, only 3 were dealt with by the Grand Chamber.
While, for example, a mere deviation from previously settled case-law in one of the six areas now falling within the General Court’s competence would not as such appear to affect the unity or consistency of Union law, one should also bear in mind that a limited risk of divergences due to well-settled case-law has been one of the criteria used for choosing the areas of transfer.
Finally, the General Court’s implementation of Article 256(3) TFEU in Article 207(3) of its rules of procedure constitutes an intriguing variation on the faculty/duty theme for the indication that ‘[t]he decision to refer the case shall be taken by the plenum’ should hardly be understood literally to the effect that the plenum has no other option than to rubber-stamp the referral proposed by the chamber or, as the case may be, the GC’s President or Vice-President. Both comparative law and legal linguistic research can steer the GC towards recognising that this shall means may insofar as the decision to refer or not is concerned.
Secondly, the General Court’s faculty to refer a preliminary ruling reference back to the Court of Justice needs to be read both in conjunction with, and opposition to that Court’s option under Article 256(3) TFEU to review a judgment. Ironically, even though the threshold for the Court’s initiative to review the General Court’s interpretation is higher (‘serious risk of the unity or consistency of Union law being affected’) than that for a referral back, it may be easier to meet insofar as the Court of Justice, in its capacity of supreme arbiter of all Union law, including its structural tenets, can elevate mere inconsistencies failing the General Court’s affectation test to structural issues of unity or consistency. The risk of seeing contradictory case-law emerge could thus justify a review in a given case meant to put the General Court back on track. While EU law still lacks an express provision on the precedential value of Court of Justice case law for the General Court beyond the remit of Article 61 of the Statute,[2] there may indeed be an argument in favor of policing, by means of the review procedure, whether the quality of the uniform interpretation of EU law is maintained. At the same time, review under Article 256(3) TFEU should be absolutely exceptional so to avoid eroding the General Court’s competence and authority, as well as undue delay, the latter having been underlined in the Court’s legislative request
Thirdly, besides the faculty to refer back there is indeed an express duty to do so as well, for the amended Statute now provides in Article 54(2) that where the General Court finds a preliminary ruling request to come within the sole jurisdiction of the Court of Justice, it shall refer that request to the latter. Notwithstanding the loophole generally left by the modal auxiliary shall and the General Court’s undeniable margin of appreciation in its assessment of jurisdiction, there’s no doubt as to the required course of action.
A trickier question lies elsewhere.
The General Court states in the explanations on Article 207 of its rules of procedure as amended that even after the initial analysis carried out by the Court of Justice, certain aspects of a request for a preliminary ruling may turn out to come within areas other than the specific areas for which the General Court has responsibility, in particular where questions of interpretation of primary law arise in the course of proceedings.
While it appears compelling in theory, the proper distinction between situations falling under Article 54(2) of the Statute and Article 256(3) TFEU may pose some riddles in practice.
For the time being, the logic of the mechanisms foreseen by the Treaty, the Statute and the Rules of procedure in order to preserve the Court’s jurisdiction as well as the unity and consistency of EU law in connection with the transfer of preliminary ruling requests to the General Court can be described as conferring growing degrees of discretion as to the Court’s involvement: none for the ex ante denial of jurisdiction, some for the referral back in medias res, and significantly more for the ex post decision to review.
With this attempt at systematisation and the obvious caveat that only practice can tell what impact the possibility – and eventual duty – to refer cases back to the Court of Justice will have on the General Court’s preliminary ruling jurisdiction and case-law, I close my preliminary assessment of this matter. Let me add, though, that it exclusively reflects my personal opinion and indeed counts 1500 words.
[1] While legal certainty and the protection of legitimate expectations do not confer a vested right in a consistent jurisprudence (ECtHR, Unédic v France, Appl. No 20153/04, § 74) a well-established jurisprudence may require a more substantial statement of reasons justifying a departure (ECtHR, Atanasovsky v FYROM, Appl. No 36815/03, § 38).
[2] Beyond that hypothesis, the General Court does not find itself under an absolute obligation to follow the Court’s interpretation but should do so as a rule, in order to prevent its judgments from being set aside on appeal, see Case T-85/09, Kadi v Commission, T:2010:418, para. 121.
Dominik Düsterhaus is a référendaire at the Court of Justice of the European Union.
Düsterhaus, D.; “Referring cases back to the Court of Justice: faculty or duty?”, EU Law Live, 04/07/2024, https://eulawlive.com/op-edreferring-cases-back-to-the-court-of-justice-faculty-or-duty/
SYMPOSIUM
COMPETITION CORNER:
SYMPOSIUM ON SELECTIVITY IN STATE AID
Selectivity and the reference framework: the evolution in the Spanish Goodwill saga
Jacques Derenne & Ana Álvarez Vidal
Introduction
The criteria of selectivity for a State measure to qualify as an aid measure under Article 107(1) TFEU is probably the most problematic issue in certain circumstances, in particular regarding tax measures. Selectivity makes possible to categorise a measure as State aid and to distinguish it from a mere general tax or economic measure introduced by Member States within their autonomous policy powers (Air Liquide Industries Belgium C-393/04 and C-41/05, para 32). In short, selectivity may be seen as the hinge allowing the application of State aid rules in tax matters.
One prime example of the sophistication of dealing with selectivity in State aid tax measures is undoubtedly embodied in the so-called Spanish Goodwill saga, showing as well how it is unsettled that the necessary and satisfactory legal stability and certainty of this condition has been reached. This is a complex, never-ending and, as a matter of fact, not-yet-fully-ended litigation chronicle: there is a parallel litigation existing against Decision of 15 October 2014 (SA.35550) concerning a Spanish scheme for the tax amortisation of financial goodwill for foreign shareholding acquisitions. This parallel case concerns a new administrative interpretation adopted by the Kingdom of Spain extending the scope of application of that scheme. This decision was annulled in September 2023 (Banco Santander and Santusa, T-12/15, T-158/15, T-258/15 - appealed by the Commission: C-777/23 P, pending). This branch of litigation will not be subject to comment in the present article since it does not specifically concern the issue of the reference framework.
When examining this saga, one element rises as capital for the correct determination and application of the legal standard as regards material selectivity: the reference framework to be used when assessing a tax measure under the lens of State aid (see, for instance, Daniela Gschwindt, ‘The dynamics of selectivity in tax ruling cases’, EU Law Live, 11 June 2024).
According to the Commission 2016 Notice on the Notion of State aid, ‘the reference system constitutes the benchmark against which the selectivity of a measure is assessed’ (para 132). The determination of the reference framework is of particular importance in the case of tax measures, since the existence of an economic advantage for the purposes of Article 107(1) TFEU may be established only when compared with ‘normal’ or ‘ordinary’ taxation. The reference framework, also called ‘reference system’, ‘common regime’ or ‘normal regime’ (Banco Sandanter and Santusa, T-399/11 RENV, para 29) is part of the three-step approach method developed by the EU case-law (already present in Paint Graphos, C-78/08 to C-80/08, paras 50-54) and consolidated in the Commission 2016 Notice used to assess material selectivity.
This three-step test first identifies the reference framework (which constitutes the benchmark of normal taxation against which the advantage should be compared) to, secondly, assess if any advantage arising from the measure is indeed selective by derogating from the reference framework and is not granted to all undertakings in comparable legal and factual situations. Thirdly, it examines the possible justifications put forward by the Member State that may establish that the measure is justified by the overall nature or logic of the system to which it belongs.
It should be noted that this three-step approach, based on the identification of the reference framework, even if established by the case-law, has not always convinced all. In this regard, it is worth noting the opinion of Advocate General Øe in A-Brauerei (C-374/17), where it openly supported a reversal of the method and the case-law to go back only to the traditional availability test (where any advantage which is not open to all undertakings present on the national territory is to be seen as selective) versus the three steps, which are also known as the “discrimination test”. The Court’s approach was criticised for promoting a ‘subjective’ or ‘behavioural selectivity’ (see, e.g., Conor Quigley QC, Update on World Duty Free Group in ‘Milestones in State Aid Case Law’, EStAL’s First 20 Years in Perspective, Lexxion, 2022, pp. 459-468; Jacques Derenne, ‘Commission v World Duty Free Group a.o.: Selectivity in (Fiscal) State Aid, quo vadis Curia’, Journal of European Competition Law & Practice, 2017, Vol. 8, No. 5, pp. 311-313).
The Court in that case, however, did not follow this proposal, although it paradoxically did not properly and orderly follow the three steps and jumped to the derogation from the common tax system before the analysis of the reference framework (A-Brauerei, paras 35 and following).
This practice has been relatively frequent and has even been noted by the EU case-law in the Spanish Goodwill saga: ‘the comparison exercise which applies for the purposes of implementing the second step of the method […] now resembles, to a large extent, the method that the Court of Justice also uses for the purposes of defining the material scope of the reference framework’ (World Duty Free, T-219/10 RENV, para 144) In the same line, Advocate General Pitruzzella noted how ‘the approach now established in the case-law of the Court […] tends to equate the notion of selectivity with that of discrimination’ and how ‘the central importance of that reference system cannot, however, be disputed’ (World Duty Free, C-51/19 P and C-64/19 P, para 39). This has involved a long, sometimes tortuous, judicial route.
Where it all started: The 2009 and 2011 Commission Decisions
The saga takes us back two decades ago, where the Spanish authorities introduced new rules on the amortisation of financial goodwill in the Spanish Corporate Tax Act (Article 12(5) of Law 43/1995 on corporate tax). The reform allowed companies taxable in Spain to amortise the financial goodwill resulting from the acquisition by an undertaking resident in Spain of a shareholding at least 5% in a foreign company (that is, a non-Spanish company but still a EU company). However, acquisitions by undertakings taxable in Spain of shareholdings in other resident (not foreign) undertakings did not give rise to this benefit, unless they followed a business combination.
After receiving Parliamentary questions regarding the measure in 2005 and 2006, and after several rounds of information exchanges with the Spanish authorities, the Commission initiated the formal investigation procedure
in October 2007. After careful examination, the Commission adopted a negative decision (‘the 2009 Decision’) declaring the incompatibility of the Spanish scheme with the internal market as regards aid granted to beneficiaries in respect of intra-EU acquisitions. In parallel, the Commission had kept the procedure open as regards outsideEU acquisitions, as the Spanish authorities still had to provide information regarding the impact on direct investments by Spanish companies in non-EU States. Following its previous 2009 Decision, the Commission declared the Spanish aid scheme incompatible with the internal market as regards aid granted to beneficiaries in respect of extra-EU acquisitions in its decision of 12 January 2011 (‘the 2011 Decision’).
The parcours before the EU Courts: first round
Both Commission decisions were challenged in parallel, based on pleas alleging a Commission’s error when applying the selectivity condition to the measure. The two decisions were annulled on 7 November 2014 by the General Court on the basis of a misapplication of the notion of material selectivity (Autogrill España, T-219/10 and Banco Santander and Santusa, T-399/11) by the Commission. The General Court confirmed the three-step analysis and argued that the Commission had misapplied the method since ‘a derogation from or exception to the reference framework identified by the Commission cannot, in itself, establish that the measure at issue favours ‘certain undertakings or the production of certain goods’ within the meaning of Article 107(1) TFEU, since that measure is available, a priori, to any undertaking’ (judgments of 7 November 2014, cited above, paragraphs 52 and 56 respectively).
Importantly, it further concluded that EU case-law required the identification of a particular category of undertakings or the production of certain goods which could be distinguished on account of their specific characteristics in order to classify the tax measure as selective (judgments of 7 November 2014, paragraphs 81 and 85 respectively).In short, the Commission had not demonstrated to the required legal standard that the Spanish scheme conferred a selective advantage on certain undertakings or the production of certain goods, since the disputed measure applied to all acquisitions of holdings of at least 5% in foreign companies without establishing a particular category of undertaking or production, but only a category of economic transactions (Autogrill España, para 53).
As both judgments were appealed, the Court of Justice examined them together and set them aside on 21 December 2016, ruling that ‘the appropriate criterion for establishing the selectivity of the measure at issue consists in determining whether that measure introduces, between operators that are, in the light of the objective pursued by the general tax system concerned, in a comparable factual and legal situation, a distinction that is not justified by the nature and general structure of that system’ (World Duty Free, C-20/15 P and C-21/15 P, para 60). In other words, the (nonjustified) discriminatory nature of the contested measure to the exclusion of certain operators (in a comparable situation) had to be established.
The Court criticised the General Court for misconstruing Article 107(1) TFEU ‘by holding that the Commission had not, in the contested decisions, demonstrated to the requisite legal standard that the measure at issue conferred a selective advantage on certain undertakings or the production of certain goods’ (World Duty Free, para 61). The Court
stressed how even where an advantage is of general application, the Commission must establish that the measure differentiates between undertakings which, in the light of the objective pursued by the legal system are in a comparable factual and legal situation, (and whether it is justified by the nature or general logic of the system). In this context, the Court rejects that, in order to find selectivity in a measure which seems in principle accessible to any undertaking, a particular category of undertakings with specific properties common to them should be identified. For the Court, this would be a ‘supplementary requirement’ which cannot be found in the case-law (World Duty Free, para 71).
Finally, the Court referred the cases back to the General Court to examine the remaining pleas that involved an assessment of facts.
Referral to the General Court and new appeal to the Court: second round and much needed clarifications
In its judgments on referrals (World Duty Free, T-219/10 RENV and Banco Santander and Santusa T-399/11 RENV ), the General Court dismissed the applicants’ actions and upheld the Commission’s decisions. The General Court examined the plea concerning a Commission’s error in identifying the reference system and rejected that the measure could constitute an autonomous reference system. As it happened in the first round of litigation, the General Court’s judgments were appealed and joined for a final examination by the Court of Justice, who dismissed the appeals on 6 October 2021 (World Duty Free, C-51/19 P and C-64/19 P and judgments delivered at the same time in C-50/19 P, C-52/19 P, C-53/19 P, C-54/19 P and C-55/19 P). In this landmark judgment, the Court of Justice confirmed the three-step approach as the test to examine the selectivity of a measure which ‘is thus, in essence, coextensive with the examination of whether it applies to a set of economic operators in a non-discriminatory manner’(World Duty Free, C-51/19 P and C-64/19 P para 33). In fact, this judgment provided with further observations that have settled and shaped the three-step analysis.
Among other pleas, the appellants had argued that the General Court (and subsequently the Commission) had erred in defining the reference system. Importantly, the Court stated how the determination of the reference system constitutes the starting point for the comparative examination to assess selectivity. Thus, ‘an error made in that determination necessarily vitiates the whole of the analysis of the condition relating to selectivity’ (World Duty Free, C-51/19 P and C-64/19 P para 61).
The Court examined the applicants’ argument that the General Court substituted its own reasoning for that of the decision at issue in ruling out the possibility that the measure at issue might constitute a reference system in its own right. In this regard, the EU case-law has been consistently sustaining that the very measure cannot constitute the reference system. For example, in Paint Graphos, the Court defined the reference framework as the corporate tax when the measure at issue consisted of an exemption from corporation tax. Similarly, in Heiser (C172/03, para 40) the reference framework was the VAT system. Some of these examples have in fact been used in the Commission 2016 Notice to illustrate how the reference system is ‘composed of a consistent set of rules that generally apply — on the basis of objective criteria — to all undertakings falling within its scope as defined by its objective’ (Commission 2016 Notice, para 133).
In this Spanish Goodwill second appeal, the Court however allows the possibility that ‘where it appears that such a measure is clearly severable from that general system, it cannot be ruled out that the reference framework to be taken into account may be more limited than that general system, or even that it may equate to the measure itself, where the latter appears as a rule having its own legal logic and it is not possible to identify a consistent body of rules external to that measure’(World Duty Free, C-51/19 P and C-64/19 P, para 63). In practice, however, a clear severability will tend to be the exception rather than the rule.
The Court also stresses that, to identify the reference system, an objective examination of the content and structure of the national rules should be made. This surely allows judicial review of the assessment. Nevertheless, the objectives pursued by the tax measure concerned may not be considered, as the objective of State measures is not sufficient to leave them out of the scope of the State aid qualification (World Duty Free, C-51/19 P and C-64/19 P paras 65 and 66). Moreover, and as noted by the Court, the use of a particular regulatory technique cannot enable national tax rules to evade State aid provisions either and thus cannot be decisive to determine the reference framework. It is the derogation caused by such technique which is relevant. The Court also recalled how the mere fact that the measure at issue is of a general nature, in that it may a priori benefit all undertakings subject to corporate tax, does not mean that it cannot be selective.
Finally, the Court backs the General Court’s finding that companies acquiring shareholdings in non-resident companies are, in the light of the objective pursued by the tax treatment of goodwill, in a comparable factual and legal situation to that of undertakings which acquire shareholdings in resident companies. On that basis, in spite of the error in law recognised in the General Court’s substitution of its own reasoning of the objective of the reference system (to ensure consistency between the tax treatment and accounting treatment of goodwill), the Court rejects the applicants’ plea.
Conclusion
The Spanish Goodwill saga illustrates the complexity of the analysis for material selectivity and the balance needed with the powers of the Member States to introduce their own national tax policies and measures. The Member States in principle define the reference system by using their exclusive powers on direct taxation, but the Commission can (and will) challenge the reference framework.
This balance should be achieved by an objective examination of rules under national law by the Commission, without taking into account the objectives pursued by these provisions (objectives are not sufficient to exclude the classification of State aid). This exercise is difficult and can be the source of much legal uncertainty. This is what Advocate General Pitruzzella expressed in his opinion of 21 January 2021: ‘I am well aware of the difficulty of that task and the strength of the arguments of those who believe that the reference system is (and cannot be) anything other than the result of a subjective choice. However, given the importance that that notion has acquired in the analysis of the selectivity of tax measures, I consider it more useful to try to find a way to ‘live’ with it, rather than persevere in highlighting the objective difficulties of its practical application’ (footnote 72).
In this respect, the Commission 2016 Notice is well outdated regarding material selectivity and the reference framework, the selectivity criterion being already its longest and most complex section. It is well known that the application of State aid rules to tax matters (even further proved by the tax ruling cases) is very complex. Deciphering selectivity is a complex exercise whose examination should be integrated within the one of the five/ four criteria for the notion of State aid and not be collapsed with the requirement of “advantage”, in particular in tax matters (and against the latest practice of the Court). In recent tax ruling cases, one of the parties submitted that the reference framework “must be based on the national tax system at issue and not on a hypothetical tax system” (Fiat and Ireland v Commission, C-885/19 P and C-898/19 P, para 56), when referring to the argument that the arm’s length principle could be applied in the situation at hand only if the national legislation constituting the normal taxation system had incorporated it. In other words, the derogation from the reference framework had to consider rules and principles that were actually included in the national system constituting that framework and not on external (or hypothetical) rules.
Jacques Derenne is avocat, Brussels and Paris bars, and Professor at the University of Liège & at the Brussels School of Competition.
Ana Álvarez Vidal is abogada, Salamanca and Brussels bars.
Derenne, J. and Álvarez Vidal, A. ; “Selectivity and the reference framework: the evolution in the Spanish Goodwill saga”, EU Law Live, 30/60/2024, https://eulawlive.com/competition-corner/selectivity-and-the-reference-framework-the-evolution-in-the-spanish-goodwill-saga-by-jacques-derenneana-alvarez-vidal/
THE LONG READ
Republicanism during the EU’s Ninth Legislative Term. Taking Stock with the White Paper on the Future of Europe
Armin von Bogdandy & Michael Ioannidis 1
I Thesis and argument
As we write, the European Union’s ninth legislative term is drawing to a close. What is the Union like at this time of political change? To take stock, we turn to the Commission’s 2017 White Paper on the Future of Europe, which presents five scenarios for the development of the EU by 2025. They range from a return to the basics of the Single Market (Scenario 2) to a much deeper federation (Scenario 5).2 Although the Commission does not explicitly endorse any of these scenarios, the structure of the White Paper (placing Scenario 5 as the last scenario), its framing (such as the role of the Ventotene Manifesto) and its vocabulary (such as the European ‘We’) suggest that it is aiming for further federalisation.
By this standard, the Commission can be satisfied. In terms of the White Paper, the EU is in Scenario 5, perhaps even in a ‘Scenario 5+’, because important integration steps go beyond the expected horizon of 2017. We substantiate this thesis by reflecting on the White Paper in the light of two concepts that we believe shed light to the federal aspiration of the European Union, European society (II.) and the new republican dynamics (III.), and focusing especially with regard to Economic and Monetary Union (IV.).
II Traces of European society
70 years of ever closer union may not have produced a European federal state, a European nation or a European people, but they have led to a European society, which has become much denser in the ninth term. There are good reasons – theoretical, empirical and legal – why we can, indeed should, speak of a European society today.3 The concept of ‘European society’ captures empirical observations of the intensification and persistence of social interactions in the space defined by Union law. For ease of understanding: European society is simply a better concept for understanding the 70 years of Europeanisation and integration of national societies, with a marked acceleration in the ninth term, not least because of the crisis it has had to cope with.
1. Armin von Bogdandy is director at the Max Planck Institute for Comparative Public Law, Michael Ioannidis is Lead Legal Counsel at the European Central Bank; the usual disclaimers apply.
2. European Commission, White Paper on the Future of Europe. Reflections and scenarios for the EU27 by 2025, COM(2017)2025, 1 March 2017; page numbers in the text refer to this document.
3. In detail William Outhwaite, European Society, Cambridge, Wiley, 2008; Stefanie Börner and Sören Carlson, Europasoziologie, Baden-Baden, Nomos, 2023; Armin von Bogdandy, The Emergence of European Society through Public Law: A Hegelian and Anti-Schmittian Approach, Heidelberg, Oxford, OUP, 2024.
European society is a legal concept with constitutional dignity, enshrined in Article 2 TEU by the Treaty of Lisbon. As the White Paper shows (pp. 10, 24, 26), this concept is part of political communication; it has also found its way into the case law of the Court of Justice4 and into legal scholarship.5 Like Article 2 TEU, the White Paper understands ‘European society’ to be more than just civil society (p. 3). ‘Civil society’ refers only to the sphere of private engagement for the common good. The concept of society is much broader: as in Article 16 of the Declaration of the Rights of Man and of the Citizen of 1789 or Article 8 para. 2 of the European Convention on Human Rights, in Émile Durkheim or Max Weber, it includes political institutions, in Article 2 TEU those of the European Union and its Member States. European society is not antithetical to public authority but encompasses it.
The concept of European society provides a better understanding of the challenges facing the Union. By using the term European society, it becomes clear that most of today’s challenges are no longer specific to the Member States, but affect all European citizens as members of a society. Furthermore, the concept promotes a better understanding of the conflicts that concern the Union: these are no longer just conflicts between Member States, but also conflicts within a society. It is not enough to view the conflict over the Union’s fiscal and economic policy only as a conflict between responsible (or stingy) Member States in the North and Keynesian (or financially irresponsible) ones in the South; the conflict over immigration only as a conflict between Member States at the external borders and those within; the conflict over the democratic rule of law (an astonishing omission from the White Paper) only as a conflict between liberal western Member States and illiberal eastern ones. These are always conflicts found between different political and ideological camps which are present in almost all Member States.
A key development in the ninth term was the Union’s response to authoritarian developments in Poland and Hungary. The Union’s mobilisation led to communicative processes that have deepened European society. 6
III Evidence of the Republican Dynamic
Republican federalism is the second basic frame of our assessment. Indeed, the White Paper’s key reference is the Ventotene Manifesto, which aims for a federal republican Europe (p. 6).7 This manifesto builds on Kant and the Federalist Papers
4. Judgment of the General Court of 27 July 2022, RT France v Council (Case T-125/22, EU:T:2022:483, paragraphs 55, 88, 193 and ff.).
5. Cf. only Stelio Mangiameli, Article 2, in: Hermann-Josef Blanke and Stelio Mangiameli (ed.), The Treaty on European Union (TEU): A Commentary, Berlin, Springer, 2013, Article 2 TEU, para. 5 f. and 35-41; Loïc Azoulai, ‘The law of European society’, Common Market Law Review 59, Special Issue, 2022, pp. 203-214.
6. Alexander Somek and Elisabeth Paar, ‘Europe’s Political Constitution’, European Law Open 2, 2023, pp. 1-27.
7. Altiero Spinelli and Ernesto Rossi, ‘Per un’Europa libera e unita. Progetto di un manifesto’, in: idem (ed.), Il Manifesto di Ventotene, Napoli, Guida, 1982, pp. 9-30 (22 ff.). On European republicanism, Armin von Bogdandy, ‘The European Renaissance of Republicanism. On the Future of EU Law in Light of Article 2 TEU’, Max Planck Institute for Comparative Public Law & International Law (MPIL) Research Paper No. 2024-02, Available at SSRN.
Most of the federalist positions that today conceive of the Union as a democratic and solidarity-based polity have a republican orientation. It is a federalism that unites republics in a common republic. Its proponents include the Italian socialist Giuliano Amato, the French liberal Valéry Giscard d’Estaing, and the Belgian Christian Socialist European federalist Jean-Luc Dehaene, who as Presidium of the Constitutional Convention drafted Article 2 TEU. This spirit can also be found in the Conference on the Future of Europe, with its quest for more European solidarity, more participation by European citizens and more joint decision-making.8 It is also obvious in the Commission’s Legal Service’s 2022 publication ‘70 Years of EU Law’, with the republican-alluding subtitle ‘A Union for its Citizens’.9
We see a specifically republican development during the ninth term in the importance gained by Article 2 TEU, which we read as a republican manifesto providing for the European constitutional core (or identity). Today, the values and principles of Article 2 TEU are omnipresent in legal, political and everyday discourse. This significance of the values was not yet foreseeable in 2017. The values appear in the 2017 White Paper only in passing and in rather empty phrases. This is all the more remarkable as Viktor Orban’s authoritarian drift had already begun in 2010. The White Paper’s failure to mention this existential challenge shows how difficult it has been for European politics to respond to it and place it in one of the scenarios for the future of the EU.
In the face of this political deadlock, the Court of Justice delivered judgments whose transformative impact was compared by its President to van Gend en Loos and Costa v ENEL10: it began in 2018, one year after the publication of the White Paper, with the judgment in the ASJP case.11 This line of jurisprudence culminated in the judgments of 16 February 2022, perhaps the most important during the IX legislative period: The values enshrined in Article 2 TEU ‘define the very identity of the European Union as a common legal order’, according to the plenary.12 The ninth term has thus seen the functional constitutionalism of the Court of Justice, which focuses on the effectiveness of the EU, develop into a principled constitutionalism in line with the constitutional traditions of most Member States. This operationalisation is not an isolated path of the Court of Justice, but is supported by all institutions. The European Council and the Union legislature of the ninth term have confirmed the case law and moulded it into legal acts that were unimaginable in 2017.13
8. Conference on the Future of Europe, Report on the Final Outcome, Brussels, 2022.
9. European Commission (ed.), 70 Years of EU Law. A Union for its Citizens, Luxembourg: Publication Office of the European Union 2022.
10. Koen Lenaerts, ‘Upholding the Rule of Law through Judicial Dialogue’, Speech at King’s College London (21 March 2019), [min: 19:23].
11. Judgment of the Court of Justice of 27 February 2018, Associação Sindical dos Juízes Portugueses (C-64/16, EU:C:2018:117, paragraphs 30, 32, 35).
12. Judgment of the Court of Justice of 16 February 2022, Hungary v Parliament and Council (C-156/21, EU:C:2021:974, paragraphs 127, 232 and ff.); judgment of the Court of Justice 16 February 2022, Poland v Parliament and Council (C-157/21, EU:C:2022:98, paragraphs 145, 264 and ff.).
13. See recitals 3 and 5 of Regulation (EU) 2020/2092 of the European Parliament and of the Council of 16 December 2020 on a general regime of conditionality for the protection of the Union budget, OJ 2020 L 433I, p. 1.
Why are these republican developments? In comparative law terms, they are an application of what the French and Italian (and US) constitutions qualify as a defence of the republican form of government. Moreover, there is a republican undertone in the substance of the relevant decisions: all EU institutions define the rule of law in terms of the separation of powers, representative democracy, transparent legislation and the protection of fundamental rights, i.e. not in terms of the formal concept of the rule of law. The emphasis on the separation of powers and independent institutions in particular is a key republican objection to those who use the electoral mandate as their strongest trump card.
Moreover, the growing importance of solidarity underpins a republican interpretation of integration in the ninth legislative period. The White Paper already emphasises this principle more than any other, since the quotation from Robert Schuman with which the Commission opens its comments is about solidarity (p. 4).14 The Court of Justice confirms this republican interpretation with the role it assigns to the principle of solidarity in the second sentence of Article 2 TEU. 15 It is no coincidence that Koen Lenaerts and Stanislas Adam emphasise the federalising significance of solidarity.16
IV A Republican EMU
1. Criteria
If we look at what the White Paper calls for in the fifth scenario, we see that much has been achieved in the ninth term. The Union has built up a huge administration for refugees. This is reflected in the increased powers of Frontex and the European Asylum Agency (EUAA, formerly EASO) and their significantly increased financial resources. Frontex’s budget has increased from €254 million in 2016 to €829 million in 2023, 17 while the EUAA’s budget has increased from around €19 million in 2016 to around €180 million in 2023.18 Moreover, the Union has been able to meet almost all the challenges posed by the British withdrawal within the constitutional framework of the Union, demonstrating a capacity for action that has probably surprised all observers.
A key issue in the assessment of the White Paper is whether the European Economic and Monetary Union (EMU) has evolved in line with the fifth scenario.19 The benchmark for the White Paper is the 2015 Report ‘Completing Europe’s Economic and Monetary Union’ by Commission President Juncker, President of the Euro Summit Tusk, President of the Eurogroup Dijsselbloem, President of the European Central Bank Draghi and
14. The importance of solidarity for republicanism derives in particular from the French tradition, see Claude Nicolet, L’idée républicaine en France: Essai d‘histoire critique (1789-1924), Paris, Gallimard, 1994.
15. Judgment of the Court of Justice, Hungary v Parliament and Council, paragraph 129. (fn.12).
16. Koen Lenaerts and Stanislas Adam, ‘La solidarité, valeur commune aux états membres et principe fédératif de l’Union européenne’, Cahiers de droit européen 57, 2021, pp. 307-417, 314 and ff.
17. Statista, Budget of the European Border and Coast Guard Agency (Frontex) for the years 2005 to 2024, (30/05/2024), available here
18. EUAA, Statement of Revenues and Expenditures 2016, (30 May 2024), available here; Statement of Revenues and Expenditures 2023, (23 May 2024) available here.
19. The rhetoric of solidarity is remarkable, White Paper, p. 9 f.
Martin Schulz as President of the European Parliament (hence the Five Presidents’ Report),20 which the White Paper integrates into its Scenario 5 (pp. 17-18). Scenario 5 thus calls for a strengthening of EMU through substantial steps not only in the economic union, but also in the fiscal union, financial union and political union.21 The Five Presidents’ Report called for the strengthening of the economic union through dedicated competitiveness authorities, more effective procedures for tackling macroeconomic imbalances (MIPs) and binding convergence benchmarks for employment and social performance, which is why the European Semester is designed to improve policy coordination and surveillance and better integrate the economic, fiscal and social dimensions. A new European Fiscal Board (EFB), a shock absorption mechanism and a strengthening of the European Stability Mechanism (ESM) are intended to take the fiscal union forward. On the financial union, the report calls for a backstop for the Single Resolution Fund (SRF) and a European Deposit Insurance Scheme (EDIS) to complete the banking and capital markets union. The political union should be strengthened through better parliamentary oversight, a eurozone treasury and the integration of international legal structures (in particular the ESM) into EU law.
In order to make a meaningful assessment of whether developments are in line with the Five Presidents’ Report (and thus Scenario 5 of the White Paper), it is first necessary to move away from the idea of a ‘genuine’ and ‘complete’ Economic and Monetary Union. These concepts imply that it is clear what a ‘genuine’ and ‘complete’ EMU would mean for European society. But there is no such thing. There is no a priori yardstick for determining the ‘right’ regulatory and institutional framework for an economic and monetary union. What is ‘right’ is a matter of political choice. Therefore, we do not assess a slavish one-to-one implementation of the proposals contained in the 2015 report, but rather an overall assessment in the light of the problems identified in the report. The advantage of this approach is that it avoids a mechanical ‘tick-the-box’ assessment that would underestimate EMU developments. Of course, important demands remain unfulfilled, such as a European deposit guarantee scheme, which is important for the banking union. At the same time, innovations introduced during the ninth term implement Scenario 5 and go even beyond the 2015 horizon.
2. The Development of the EMU
By 2020, EMU had taken only hesitant steps in line with the Five Presidents’ Report. Efforts have been made to improve the efficiency of the procedures for dealing with macroeconomic imbalances (MIPs),22 and the European Fiscal Board (EFB) was established in 2016 to improve fiscal surveillance and advice23.
20. European Commission, Completing Europe’s Economic and Monetary Union, 22 June 2015.
21. More detail in Frank Schorkopf, ‘Zukunftsorientierung oder Realitätsleugnung? Der Präsidentenbericht zur Reform der Europäischen Union, Zeitschrift für Staats- und Europawissenschaften’, ZSE 13, 2015, pp. 356-373.
22. Beatrice Pierluigi and David Sondermann, ‘Macroeconomic imbalances in the euro area: where do we stand?’, ECB Occasional Paper Series, 2018.
23. Commission Decision (EU) 2015/1937 of 21 October 2015 on the establishment of an independent advisory European Fiscal Board, OJ 2015 L 282, p. 37-40.
In 2019, the Eurogroup agreed on an important reform of the ESM, which was endorsed by the Euro Summit.24 It included a backstop for the single resolution fund, streamlined decision-making processes and new financial assistance instruments. Ratification of the reform by the Italian parliament is, however, still pending. In any case, the ESM would remain an international organisation and therefore ‘not fully integrated into the EU Treaties’ (p. 18). Nevertheless , an ESM formally outside the Treaties is less critical today than in 2015 and 2017 because the Court of Justice has partially integrated it into EU law. It already ruled in the Pringle case that EU measures must be conditioned by the ESM, which the Commission must ensure.25 In Ledra Advertising, the second landmark ruling on the ESM, the Court extended fundamental rights to the ESM: EU institutions that ‘borrowed’ by the ESM26 are also bound by the Charter.27 If the Commission fails to ensure that loan agreements under the ESM are compatible with EU law, it can be held liable under Article 340(2) TFEU.28
The banking union has also made progress, for example with the deepening of the Single Supervisory Mechanism (SSM). Nevertheless, important responsibilities for crisis management remain at the national level, and even where crisis management responsibilities have been centralised – as in the area of resolution – there is a strong incentive not to use the EU resolution option. The euro area banking system remains fragmented and many banks continue to buy mainly sovereign bonds of their own country, perpetuating the sovereign-bank vicious circle.29
The same goes for the Capital Markets Union. On the one hand, progress has been made, including the 2020 Action Plan, which aims to diversify funding sources and promote cross-border investment. On the other hand, there is no doubt that capital markets are poorly integrated, which means that we can only speak of a Capital Markets Union to a certain extent. 30
Importantly, until 2020 there was no shock absorption mechanism, no Union fiscal capacity, in place, a significant gap in the architecture of the EMU. Already in 2017, in the light of the Five Presidents’ report, the Commission had presented a roadmap for a European stabilisation mechanism to quickly mobilise resources for Member States. The sole objective at that time was to cushion asymmetric shocks. The Commission was also keen to minimise
24. Euro Summit, main results 13 December 2019.
25. Article 13(4) ESM Treaty and judg ment of the Court of Justice (plenary) of 27 November 2012, Pringle (C-370/12, EU:C:2012:756, paragraphs 112-113).
26. The Commission, the ECB and the Court of Justice are entrusted with ESM functions outside the (formal) EU legal order. The Court of Justice has recognised that this is compatible with EU law. See the judgment of the Court of Justice, Pringle, paragraphs 153 et seq.
27. Judgment of the Court of Justice of 20 September 2016, Ledra Advertising v Commission and ECB (C-8/15 P to C-10/15 P, EU:C:2016:701, paragraphs 67 and 59); judgment of the General Court of 13 July 2018, Chrysostomides, K. & Co. and Others v Council and Others (T-680/13, EU:T:2018:486, paragraphs 93 and 96).
28. Judgment of the General Court, Chrysostomides, K. & Co. and Others v Council and Others, paragraph 96.
29. David Howarth and Amy Verdun, ‘Economic and Monetary Union at twenty: a stocktaking of a tumultuous second decade: introduction’, Journal of European Integration 42, 2020, pp. 287-293.
30. Eurogroup, Statement of the Eurogroup in inclusive format on the future of Capital Markets Union, Statements and remarks, 11 March 2024; ECB Governing Council, Statement by the ECB Governing Council on advancing the Capital Markets Union, 7 March 2024; Christine Lagarde, A Kantian shift for the capital markets union, Speech at the European Banking Congress, 17 November 2023.
moral hazard.31 In 2018, it made corresponding legislative proposals to set up a reform support programme32 and a European investment stabilisation function.33 The Commission’s proposal was based on Article 175(3) TFEU, which aims at economic, social and territorial cohesion. This was met with considerable resistance in the Council. Nevertheless, the Euro Summit authorised the Eurogroup to develop a ‘Budgetary Instrument for Convergence and Competitiveness for the Eurozone’ (BICC),34 which should be part of the EU budget from 2021.35 While the Reform Assistance Programme and the European Investment Stabilisation Function were based on Article 175(3) TFEU, the BICC proposal was based on Article 136(1)(b) TFEU in conjunction with Article 121(6) TFEU.
The picture changed towards a breakthrough in Scenario 5 in the wake of the COVID crisis, in particular thanks to the introduction of a Union fiscal capacity. The year 2020 marked a significant step, combined with a course correction, due to several crises, in particular the COVID-19 pandemic, but also climate change, challenges to the rule of law and geopolitical tensions. These crises required a conceptual evolution, indeed a reorientation of EMU, away from thinking in terms of moral hazard, asymmetric shocks, competitiveness and convergence towards thinking in terms of trust, solidarity, productivity and overcoming common challenges. Since 2012, the European Central Bank has already played a crucial role in minimising divergences in borrowing costs with new instruments. The NextGenerationEU (NGEU) project builds on this legislatively: a fiscal mechanism of the Union is to tackle common challenges with comprehensive fiscal measures. The focus is no longer on coping with asymmetric shocks, but on launching a genuine common economic policy. Solidarity replaces moral hazard and responsibility as the central concept.36
As the Eurogroup declaration of 9 April 2020 shows, European solidarity gained a new role in the EMU.37 Commission President von der Leyen described SURE, the instrument for granting concessionary loans to EU Member States to support their short-time working schemes, as ‘real European solidarity in action’.38 SURE was based on Article 122 TFEU and, unlike the euro crisis aid packages, was subject to only a few conditionalities. Article 122 TFEU is also the legal basis for the basic component of the NGEU.39
31. European Commission, Questions and Answers: Commission sets out roadmap for deepening Europe’s economic and monetary union, December 2017.
32. Proposal for a Regulation of the European Parliament and of the Council establishing the Reform Support Programme, COM(2018) 391 final, 2018/0213(COD).
33. Proposal for a Regulation of the European Parliament and of the Council establishing a European Investment Stabilisation Function COM/2018/387 final - 2018/0212 (COD).
34. Euro Summit (14 December 2018) - Declaration, EURO 503/18, margin no. 4.
35. Proposal for a Regulation of the European Parliament and of the Council on a governance framework for the budgetary instrument for convergence and competitiveness for the euro area, 24 July 2019 COM(2019) 354 final, 2019/0161 (COD).
36. Michael Ioannidis, ‘Between Responsibility and Solidarity: COVID-19 and the Future of the European Economic Order’, Zeitschrift für ausländisches öffentliches Recht und Völkerrecht 80, 2020, pp. 1-11.
37. See here.
38. Speech by President von der Leyen on the economic recovery plan and resilience at the Fundação Champalimaud, 29 September 2020.
39. Council Regulation (EU) 2020/2094 of 14 December 2020 establishing a European Union Recovery Instrument to support the recovery in the aftermath of the COVID-19 crisis, OJ L 433I, 22.12.2020, p. 23-27.
The choice of Article 122 TFEU as the protagonist of the post-2020 EMU is a political and conceptual step that is fundamental for Scenario 5 of the White Paper. 40 Article 136(3) TFEU, the basis of the previous crisis support, aims at avoiding moral hazard and emphasises national responsibility. Article 175(3) TFEU, which underpins the proposed reform support programme and the investment stabilisation function, and which has been chosen as the legal basis for the RFF, already focuses on cohesion. Article 122 TEU is even more clearly committed to the solidarity principle in the second sentence of Article 2 TEU, so that this legal basis is best suited to a solidary republicanism.
The Court of Justice has constitutionally confirmed and developed this solidarity dimension in the rule of law conditionality cases. In contrast to the Pringle judgment, which was committed to the principle of conditionality in order to avoid moral hazard, the focus is now on mutual trust and solidarity.41 The Court of Justice thus combines macroeconomic constitutional law with the republican manifesto of Article 2 TEU. It positions the Union budget as an instrument of solidarity and demands the conditions for mutual trust between Member States in the lawful and responsible use of these budgetary resources.42 This links transfers to compliance with Article 2 TEU and allows for instruments of ‘horizontal conditionality’ that counteract deficits in the rule of law.
3. The new republican solidarity in the EMU
Some are critical of this recourse to the principle of solidarity,43 and indeed the republican path is neither legally nor politically self-evident. This is particularly true when comparing this path with the alternatives of an economic liberal or an intergovernmental (pluralist) understanding44 of the EMU and the Union. The EMU measures introduced by 2020 were compatible with all understandings, indeed they could be seen to be more in line with an economically liberal or intergovernmental understanding. The importance of responsibility, moral hazard and rule-orientation corresponded to the (economic) liberal understanding, while the transactional aspect, as clearly expressed in the Memoranda of Understanding and the contractual form of financial assistance, corresponded to the intergovernmental understanding. The focus was on the best possible aggregation and accommodation of divergent interests (donor and recipient countries) and the creation of a balance for the euro.
Of course, the measures from 2020 onwards build on previous steps. For example, during the eurozone crisis, the Union was already moving towards what we consider to be a republican EMU. Solidarity has been a major theme since 2009. From 2020 onwards, however, this dynamic is strengthened in a way that even goes beyond Scenario 5.
40. On the question of the legal basis Alberto de Gregorio Merino, ‘Follow the Money, Follow the Values’, in: Ruth Weber (Hrsg.), The Financial Constitution of European Integration: Follow the Money?, Oxford: Hart Publishing, 2023, pp. 113-130.
41. Judgment of the Court of Justice, Hungary v Parliament and Council, paragraph 129; judgment of the Court of Justice, Poland v Parliament and Council, paragraph 157. (fn. 12).
42. Ibid., Hungary v Parliament and Council, paragraph 129; Poland v Parliament and Council, paragraph 147.
43. Päivi Leino-Sandberg and Matthias Ruffert, ‘Next Generation EU and its Constitutional Ramifications: A Critical Assessment’, Common Market Law Review 59, 2022, pp. 433-472 (444-448) .
44. On the distinction, see David Held, Models of Democracy, Cambridge: Polity Press, 2006, p. 158.
What is the impetus of republican approaches as opposed to economic liberal and intergovernmental approaches? The point of convergence of republican approaches is a conception of the common good that goes beyond the mere consolidation of competing positions and the protection of existing rules. For the EMU, this means taking collective decisions on what is in the public interest, i.e. in the common interest of all citizens of the Union in the area of macroeconomics. European republicanism puts Union citizens at the centre, as equal and free citizens, while conflicts are not to be understood, nor dealt with, as conflicts between Member States, but as conflicts within a society.
Developments from 2020 onwards therefore require a new way of thinking about the EMU.45 In the past, the prevailing view was that the role of the EU institutions, in particular the Commission and the ECB, was essentially to implement the macroeconomic rules laid down in the Treaties. Now, an understanding of the macroeconomic constitution is gaining ground, according to which the Union must develop its own macroeconomic policy, raise the necessary financial resources and spend them according to the principles of solidarity and mutual trust. On this point, the federal dynamic of the last five years goes beyond the federal scenario identified in the 2017 White Paper as Scenario 5.
The most important element still missing in this scenario is direct taxation by the Union (over and above customs duties). The Union’s additional spending capacity after 2020 is mainly based on loans that, according to the current arrangements, will ultimately need to be repaid by, basically, the Member States. This is more in line with an intergovernmental approach than a republican one, which would involve repayment through the Union’s own taxes. Accordingly, there is currently an intense debate that will certainly continue in the tenth legislative term.
V Outlook
During the ninth legislature, not all but many of the elements of the 2017 White Paper for Scenario 5 have been brought about. Importantly, during this period, the role of values has been radically strengthened and fiscal integration has surpassed what was imagined in 2017. Both developments reinforce the republican dimension of a Union and the idea of a European society, which we see as important elements for approaching the essence of Scenario 5.
This does not mean that all is well: There are obvious shortcomings, for example in the future role of unanimity. Indeed, a shortcoming of the White Paper is its silence on voting methods, as well as on institutions, procedures and legitimacy issues. Any reflection on EU policy is deficient if it ignores the legal setting. The justification that ‘form follows function’ (p. 15) shows an instrumentalist understanding of law that does not do justice to its role in European society.
45. On this debate, Markus K. Brunnermeier, Harold James and Jean-Pierre Landau, The Euro and the Battle of Ideas, Princeton, Oxford: Princeton University Press, 2016, p. 85 ff.
The path of the EU’s tenth legislative term should follow the republicanism of its ninth term, which offers a coherent and principled approach to the development of European society. This includes the follow-up of the reform of the Union as decided by the European Council of 14 and 15 December.46
46. European Council, European Council Meeting (14 and 15 December 2023) - Conclusions (General Secreatriat of the Council 2023), p. 6.
HIGHLIGHT F THE WEEK S O
European Council Decisions on leadership positions, published in OJ
Monday 1 July
The European Council made two significant decisions regarding key leadership roles within the European Union, adhering to the Treaty on European Union.
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Microsoft action against decision of EDPS on compliance of use of Microsoft 365 by the Commission with Regulation 2018/1725, published in OJ
Monday 1 July
Official publication was made of an action, brought on 21 May 2024, by Microsoft Ireland Operations Ltd. against the European Data Protection Supervisor (EDPS), by which the applicant has claimed that the Court should annul the decision of the EDPS of 8 March 2024 adopted following the investigation into use of Microsoft 365 by the European Commission (Case 2021-0518).
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Commission approves Danish and Swedish restructuring aid granted to Scandinavian Airlines
Monday 1 July
The European Commission approved Denmark and Sweden’s plans to grant Scandinavian Airlines System AB (‘SAS’) restructuring aid for up to €1.3 billion, the aim of which would be to enable the company to restore its long-term viability while minimising competition distortions.
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Notice of initiation of anti-dumping proceedings on imports of epoxy resins from China, Republic of Korea, Taiwan and Thailand, published in OJ
Monday 1 July
The Official Journal of the EU published a notice of initiation of an anti-dumping proceeding concerning imports of epoxy resins originating in the People’s Republic of China, the Republic of Korea, Taiwan and Thailand.
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Court of Justice to interpret temporary protection for displaced persons in the Netherlands
Monday 1 July
The Raad van State (Council of State) of the Netherlands referred questions to the European Court of Justice for a preliminary ruling concerning the interpretation of Council Directive 2001/55/EC on temporary protection for displaced persons: Case C-290/24 (Abkez).
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EU imposes new sanctions on Belarus for involvement in Russia’s war against Ukraine
Monday 1 July
The Council adopted a new set of restrictive measures against Belarus in response to its involvement in Russia’s war of aggression against Ukraine.
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Court of Justice to decide if pets are considered ‘baggage’ under Montreal Convention
Monday 1 July
Thee Juzgado de lo Mercantil No 4 de Madrid (Commercial Court No. 4 of Madrid) referred a question to the Court of Justice for a preliminary ruling concerning the interpretation of the Montreal Convention on air travel: Case C-218/24 (Felicísima v Iberia Líneas Aéreas de España).
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Apple’s action against Commission’s decision imposing a fine for abusive App Store rules for music streaming providers, published in OJ
Monday 1 July
Official publication was made of an action, brought on 16 May 2024, by Apple and Apple Distribution International against the European Commission: Case T-260/24.
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Commission informs Meta of its preliminary view regarding the “Pay or Consent” advertising model breaching the Digital Markets Act
Monday 1 July
The Commission informed Meta of its preliminary findings that its “pay or consent” advertising model is incompatible with the Digital Markets Act (DMA).
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Court of Justice streaming hearing of case concerning the interpretation of e-Commerce Directive and GDPR in relation to a claim for compensation for non-material damage
Tuesday 2 July
The Court of Justice’s Grand Chamber hearing in Russmedia Digital and Inform Media Press (C-492/23), a case concerning a preliminary ruling request on the interpretation of certain provisions of the Electronic Commerce Directive (Directive 2000/31/EC) and the GDPR, in the context of an appeal regarding a claim for compensation in respect of non-material damage allegedly caused by the publication on various websites of advertisements containing personal data, was streamed on the Court’s website.
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Special Report 10/2024: EU professional qualification recognition – essential but underused, published in OJ
Tuesday 2 July
A recent audit examined the effectiveness of the European Commission in ensuring the uniform application of the Directive on the Recognition of Professional Qualifications.
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Court of Justice to rule on Dublin III Regulation on State-Ordered Suspension of Asylum Transfers (Cases C-185/24 and C-189/24)
Tuesday 2 July
The Oberverwaltungsgericht für das Land Nordrhein-Westfalen (Higher Administrative Court for the State of North Rhine-Westphalia) in Germany referred a preliminary ruling request to the Court of Justice of the European Union (CJEU) regarding the interpretation of Regulation (EU) No 604/2013 (Dublin III Regulation).
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ECtHR: Advisory Opinion on Romanian request under Protocol No. 16 declared inadmissible
Tuesday 2 July
The European Court of Human Rights (ECtHR) issued a decision regarding a consultative opinion request from the High Court of Cassation and Justice of Romania, under Protocol No. 16 of the European Convention on Human Rights (ECHR).
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Two Commission Implementing Regulations introducing tariff-rate quotas for sugar and eggs in the context of temporary trade concessions applicable to Ukrainian products
Tuesday 2 July
Official publication was made of two Commission Implementing Regulations on the introduction and management of tariffrate quota for sugar and eggs resulting from Regulation (EU) 2024/1392 of the European Parliament and of the Council on temporary trade-liberalisation measures supplementing trade concessions applicable to Ukrainian products under the Association Agreement between the Union and Ukraine.
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EFTA Court: EEA State cannot refuse entry and residence of third-country national on the sole ground that they have been subjected to an expulsion order
Tuesday 2 July
The EFTA Court delivered its judgment in Case E-6/23 Criminal Proceedings against MH, where it answered three questions referred by the Norwegian Supreme Court, by which clarification was sought on the interpretation of Directive 2004/38/ EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States.
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Norway has failed to fully implement Directive enhancing worker mobility through acquisition and preservation of supplementary pension rights, find EFTA Court
Tuesday 2 July
The EFTA Court has rendered its judgment in a case concerning an action brought by the EFTA Surveillance Authority (ESA) against Norway, by which ESA requested the Court to declare that Norway had failed to fulfil its obligations under Article 7 of the EEA Agreement and Article 8 of Directive 2014/50/EU of the European Parliament and of the Council of 16 April 2014 on minimum requirements for enhancing worker mobility between Member States by improving the acquisition and preservation of supplementary pension rights, by failing to fully implement that directive into its internal legal order.
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EU approves €3 billion Swedish aid for biogenic CO2 capture and storage
Wednesday 3 July
The European Commission approved a €3 billion Swedish State aid scheme to support the capture and storage of biogenic carbon dioxide (CO2), targeting emissions from biomass combustion and processing.
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Second Report on State of Digital Decade: Commission calls for intensified collective action to achieve EU’s ambition in digital transformation
Wednesday 3 July
The Commission published the Second Report on the State of the Digital Decade, providing a comprehensive overview of the progress made in the quest to achieve the digital objectives and targets set for 2030 by the Digital Decade Policy Programme.
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General Court annuls SRB Decision on bank contributions for 2022 concerning Volkskreditbank AG
Wednesday 3 July
The General Court delivered a judgment, by which it annulled the Single Resolution Board (SRB) decision (SRB/ ES/2022/18) on the calculation of pre-contributions for the Single Resolution Fund (SRF) for the year 2022, concerning Volkskreditbank AG.
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General Court upholds EU sanctions on Russian businessman Dmitry Mazepin
Wednesday 3 July
The General Court delivered its judgment in Case T-742/22 concerning Dmitry Arkadievich Mazepin’s challenge against the EU Council’s decision to maintain his name on the list of individuals subject to restrictive measures due to actions undermining Ukraine’s territorial integrity.
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Commission finds Bulgaria’s restructuring aid to Bulgarian Posts in line with EU State Aid rules
Wednesday 3 July
The European Commission approved Bulgaria’s plans to grant postal operator Bulgarian Posts restructuring aid for up to €25.51 million (BGN 50 million).
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Vacancy Notice: Legal Advisor at the European Chemicals Agency
Wednesday 3 July
The ECHA is looking for colleagues who are enthusiastic about working on protecting human health and environment in the European Union by regulating and minimising the risks tied to the use of chemicals.
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Commission approves acquisition of joint control of ITA Airways by Lufthansa and the Italian MEF, subject to fulfilment of commitments
Wednesday 3 July
The European Commission approved the proposed acquisition of joint control of ITA Airways (‘ITA’) by Deutsche Lufthansa AG (‘Lufthansa’) and the Italian Ministry of Economy and Finance (‘MEF’).
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EU Regulation 2024/1851: Extending and adjusting customs tariff suspensions for key products, published in OJ
Thursday 4 July
The Council Regulation (EU) 2024/1851, enacted on June 25, 2024, amends Regulation (EU) 2021/2278, which suspends Common Customs Tariff (CCT) duties on specific agricultural and industrial products to ensure sufficient supply and prevent market disturbances.
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Commission guidance on collaborative investment frameworks for offshore energy projects, published in OJ
Thursday 4 July
Official publication was made of Commission Communication - Guidance on collaborative investment frameworks for offshore energy projects.
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Court of Justice rules on transparency of ‘floor’ clauses in Spanish mortgage loans
Thursday 4 July
The Court of Justice delivered its judgment in Case C-450/22 | Caixabank and Others (Review of Transparency in Collective Actions), where the Court examined the transparency of ‘floor’ clauses in Spanish mortgage loans within the framework of a collective action brought by ADICAE, a Spanish association of bank users, against 101 financial institutions.
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Court of Justice rules on jurisdiction in competition damages claims by parent companies
Thursday 4 July
The Court of Justice (Fifth Chamber) rendered a judgment on July 4, 2024, in case C-425/22, following a request for a preliminary ruling from the Hungarian Supreme Court (Kúria) concerning the interpretation of Article 7(2) of Regulation (EU) No 1215/2012.
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Court of Justice rules on video conferencing in criminal trials
Thursday 4 July
In the case of FP and others (C-760/22), the Court of Justice addressed a preliminary ruling concerning the use of video conferencing technology in criminal proceedings under Directive (EU) 2016/343.
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Court of Justice dismisses appeal in case on fines in prestressing steel market cartel
Thursday 4 July
The Fifth Chamber of the Court of Justice delivered its judgment in a case on appeal brought by Westfälische Drahtindustrie GmbH (‘WDI’), Westfälische Drahtindustrie Verwaltungsgesellschaft mbH & Co KG and Pampus Industriebeteiligungen GmbH & Co KG seeking to set aside the judgment of the General Court in Case T-275/20 Westfälische Drahtindustrie and Others v Commission: Westfälische Drahtindustrie and Others v Commission (C-70/23 P).
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AG Campos Sánchez-Bordona: Article 15 of Directive 2006/123 precludes German rules restricting the holding of shares in law firms to lawyers and the members of certain professions
Thursday 4 July
Advocate General Campos Sánchez-Bordona delivered his Opinion in Halmer Rechtsanwaltsgesellschaft UG (C-295/23), a request for a preliminary ruling from the Bavarian Higher Lawyers’ Court (Germany) concerning a dispute over Germany’s rules on the provision of legal advice through limited liability companies.
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AG Szpunar: Article 21 TFEU precludes national rules which afford unfavourable tax treatment to parents of dependent children benefitting from Erasmus+ programme
Thursday 4 July
Advocate General Szpunar delivered his Opinion in Ministarstvo financija (Bourse Erasmus+) (C-277/23), a request for a preliminary ruling from the Croatian Constitutional Court concerning the interpretation of Articles 18, 20, 21 and 165 TFEU.
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AG Medina: Directive 2014/23 and Article 49 TFEU preclude Italian ‘technical extension’ scheme applicable to expired concessions for bingo activities
Thursday 4 July
Advocate General Medina delivered her Opinion in Anib and Play Game (C-728/22 to C-730/22), three requests for a preliminary ruling from the Italian Council of State concerning the compatibility with EU law of certain features of the ‘technical extension’ scheme that applies to expired concessions awarded for bingo gaming activities.
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Court of Justice: Non-automatic weighing instruments used by judicial or police authorities fall within the scope of Directive 2014/31/EU
Thursday 4 July
The Sixth Chamber of the Court of Justice rendered its judgment in a case concerning a preliminary ruling request on the interpretation of Article 1, Article 2(3) and Article 3 of Directive 2014/31/EU of the European Parliament and of the Council of 26 February 2014 on the harmonisation of the laws of the Member States relating to the making available on the market of non-automatic weighing instruments.
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Directive (EU) 2024/1760 on corporate sustainability due diligence and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859, published in OJ
Friday 5 July
The European Parliament and Council adopted Directive (EU) 2024/1760 on June 13, 2024, to establish a legal framework for corporate sustainability due diligence, aiming at ensuring that companies contribute to sustainable development by addressing human rights and environmental impacts throughout their operations and value chains.
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EBA issues new Guidelines to combat money laundering and terrorism financing in fund and crypto transfers
Friday 5 July
The European Banking Authority (EBA) released new Guidelines on the “travel rule” to address money laundering and terrorist financing through fund and crypto asset transfers.
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Legal challenges facing Mediterranean search and rescue operations: a 2024 overview published by the EU Agency for Fundamental Rights
Friday 5 July
The EU Agency for Fundamental Rights regularly collects data on NGO vessels engaged in search and rescue (SAR) operations in the Mediterranean, detailing legal proceedings against them and challenges in disembarking migrants.
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Council Recommendation on coordinated response to disruptions of critical infrastructure, published in OJ
Friday 5 July
Official publication was made of Council Recommendation of 25 June 2024 on a blueprint to coordinate a response at Union level to disruptions of critical infrastructure with significant cross-border relevance.
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Commission imposes provisional countervailing duties on imports of battery electric vehicles from China
Friday 5 July
The Commission concluded that the BEV value chain in China benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers.
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Vacancy Notice: Legal Assistant at the Office of the President of the General Court
Friday 5 July
A legal assistant position (2nd assistant, grade AST 3) will be available in the Office of Mr. Marc van der Woude, President of the General Court of the European Union.
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