The Week
29-31 July 2024
TABLE OF CONTENTS
IN-DEPTH:
Enhancing Transparency and Facilitating Sustainable Invesments: Recent Trends in EU Investment Decision-Making
Irene Salvatore & Trajan Shipley
Where is the Damage in Personal Data Theft? - Scalable Capital (C-182/22 and C-189/22) and the Hurdles of Proving the Non-Material Damage
Bilgesu Sumer
Vigilantibus non Dormientibus Iura Succurrunt: Are National Filtering Mechanisms for the Access to the Preliminary Ruling Procedure Admissible? AG Opinion in Case C-144/23 Kubera Bilgesu Sumer
Narrowing the Scope of Free Movement Restrictions? (C-598/22 - Società Italiana Imprese Balneari)
Vincent Delhomme
IN-DEPT H
Enhancing Transparency and Facilitating Sustainable Invesments: Recent Trends in EU Investment Decision-Making
Irene Salvatore & Trajan Shipley
Introduction
In recent years, the European Union (EU) has pursued an ambitious trade policy by entering into numerous socalled ‘new generation’ Free Trade Agreements (FTAs) which have championed the inclusion of non-trade policy objectives. These FTAs include chapters with commitments on sustainable development, an objective that has been recognised as an integral part of the EU’s exclusive competence over the common commercial policy. At the same time, new generation FTAs also typically include investment liberalisation and protection chapters, often combined with investor-State dispute settlement (ISDS) clauses, a competence which, by contrast, the EU shares with the Member States.
In parallel, the EU has become one of the most vocal and active parties involved in the reform process of ISDS currently taking place within the framework of the United Nations Commission on International Trade Law (UNCITRAL) Working Group III. This reform process seeks to address the various concerns and criticisms that have emerged over the years regarding the ISDS framework, including its lack of transparency and consistency or its ad hoc nature. The EU has in particular supported the idea of creating a permanent Multilateral Investment Court (MIC). To this end, it has already included provisions in its new generation FTAs that would eventually entrust resolving investment disputes to a MIC, an approach which was ruled compatible with the autonomy of the EU legal order by the Court of Justice in Opinion 1/17
Against this background, this Op-Ed discusses recent trends in international investment law commitments by the EU. In particular, it will examine the EU’s recent signature of United Nations Convention on transparency in treaty-based investor-State arbitration (the Mauritius Convention) and the conclusion of the EU-Angola Sustainable Investment Facilitation Agreement (EU-Angola SIFA). Both agreements bring important innovations concerning the reform agenda of ISDS and the EU’s approach to sustainability and investment protection in its international commitments.
Mauritius Convention on Transparency in ISDS
On 2 July 2024, the EU signed the Mauritius Convention, following the formal authorisation by the Council of the EU, after more than nine years of paralysis due to uncertainty on the division of competences between the EU and Member States. EU Member States are now allowed to ratify, accede or approve the Mauritius Convention. The ratification process is currently pending approval by the European Parliament.
The Mauritius Convention marks a milestone in relation to the transparency element of ISDS reform. It will extend the application the existing UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (UNCITRAL Transparency Rules), a set of procedural rules that increase the publicity of ISDS proceedings to overcome the lack of transparency of the current system on account of the confidential nature of the arbitral proceedings, in which questions of public interest are at stake. Despite the high degree of transparency, the current UNCITRAL Transparency Rules have a limited scope of application since they apply only to UNCITRAL investor-State arbitrations based on investment treaties concluded on or after 1 April 2024, thus carving out almost 3,000 investment treaties signed before 1 April 2014.
The Mauritius Convention (which will enter into force six months after the EU ratification), will eliminate the ratione temporis limitation and allow the applicability of the UNCITRAL Transparency Rules also to treaties concluded before 1 April 2014 by implementing a transparency principle that will unify a fragmented treaty-based system by way of a single multilateral instrument. As a result, the new UNCITRAL Transparency Rules will apply to ISDS provisions embedded in investment treaties predating 2014 where: (i) both the respondent and the investor’s home State are parties to the Mauritius Convention and have not made a relevant reservation (the so-called ‘bilateral or multilateral application’); (ii) only the respondent is a party to the Mauritius Convention and has not made a relevant reservation, and the investor agrees to the application of the Transparency Rules even when the investor’s home State is not a party to the Mauritius Convention (the so-called ‘unilateral offer of application’).
The EU’s ratification means that the Mauritius Convention will become applicable to ISDS proceedings under the Energy Charter Treaty (ECT), including during the 20 years of the sunset clause following the EU withdrawal. By virtue of the Mauritius Convention, the UNCITRAL Transparency Rules will apply whenever an investor from a home state which is also a party to the Mauritius Convention brings a case against the EU under the ECT. By contrast, when acting as a respondent in a dispute under the ECT initiated against a Member State not party to the Mauritius Convention, the EU shall not apply the Mauritius Convention unless agreed otherwise. However, the EU’s ratification opens the door for Member States to follow. Should Member States (signatories of around 1,200 bilateral investment treaties (BITs)) ratify the Mauritius Convention, the UNCITRAL Transparency Rules would become applicable to a greater number of proceedings.
EU-Angola Investment Facilitation Agreement
On 4 March 2024, the Council of the EU greenlighted the conclusion of the EU’s first-ever agreement on sustainable investment facilitation: the EU-Angola SIFA. This agreement brings important innovations that in some respects follow the trends of investment chapters in the EU’s new generation FTAs such as the EU-Canada FTA, while also representing a marked departure from them. It is also part of the EU’s strategy to secure access to critical raw materials.
Contrary to the EU’s new generation FTAs and traditional international investment agreements (IIAs), the EUAngola SIFA focuses on facilitating the conditions for sustainable foreign direct investments (FDI) between the parties. This stated objective is pursued through obligations that are essentially concerned with improving the transparency and predictibility of the investment framework. Relevant obligations include publishing in advance regulatory acts and granting investors an opportunity to comment on them, or increasing the transparency of applicable investment incentives. This stands in contrast to the traditional approach of protecting investments by agreeing on substantive standards of treatment, and granting investors direct remedies to address breaches of those standards in ad hoc ISDS fora. In particular, the EU has been pursuing the reform of these ad hoc ISDS fora by replacing them with an investment court system as a first step towards the establishment of a MIC.
In this sense, the EU-Angola SIFA differs from most FTAs and IIAs in that it only includes a single standard of protection – i.e., the Most Favoured Nation (MFN) clause. The EU-Angola SIFA also expressly excludes recourse to ISDS or to an EU-style investment court system to settle investment disputes, opting instead for consultations, mutually agreed solutions, and State-to-State arbitration. These innovations build up from the most recent EU FTAs: the EU-Chile Advanced Framework Agreement (AFA) only provides for national treatment and MFN protection, while the EU-New Zealand FTA also excluded recourse to any type of ISDS. This suggests that these innovations will likely be replicated in future investment agreements concluded by the EU. At the same time, and in line with recent EU FTA practice, the agreement places a strong emphasis on the parties’ right to regulate (i.e. the State’s ability to change the regulatory environment in the public interest) in order to attain sustainable development.
Equally, the EU-Angola SIFA also falls within the EU’s strategy to promote and diversify investment abroad in the extractive mineral sector, as it seeks to facilitate investments by EU companies in a country holding important reserves of critical raw materials. The EU’s increasing focus on access to raw materials as a trade policy priority is also evident in the EU-Chile AFA, which contains a specific chapter on energy and raw materials. The EUAngola SIFA and the EU-Chile AFA are innovative in that they place an emphasis in the development of a favourable environment to FDI in the production and trade in all stages of the value chain of raw materials, rather than prioritising the extraction and export of such raw materials.
Conclusion
The EU is currently negotiating new FTAs with Australia, Indonesia, and the Philippines, among others, while it pursues strategic partnerships on the investment value chain of critical raw materials with other third countries.
UNCITRAL Working Group III discussions on ISDS reform will focus next on a draft statute of a standing mechanism (i.e., the MIC proposed by the EU), a draft multilateral instrument on ISDS reform, and draft provisions on procedural and cross-cutting issues. This will build up on the recent adoption in principle by the UNCITRAL Commission of a statute establishing an Advisory Centre for international investment dispute resolution based on the model of the Advisory Centre on WTO Law.
The signature of the Mauritius Convention and the conclusion of the EU-Angola SIFA are good examples, respectively, of recent innovations and advancements in the reform agenda of ISDS supported by the EU, and the EU’s approach to investment protection, sustainability and other non-trade policy objectives in new generation FTAs and IIAs.
Irene Salvatore is an associate in an international law firm in Brussels, Belgium. Her practice focuses on EU and international trade and investment law.
Trajan Shipley is an associate in an international law firm in Brussels, Belgium. His practice focuses on EU and international trade and investment law.
Salvatore, I. and Shipley, T.; “Enhancing Transparency and Facilitating Sustainable Invesments: Recent Trends in EU Investment Decision-Making”, EU Law Live, 29/07/2024, https://eulawlive.com/op-ed-enhancing-transparency-and-facilitating-sustainable-invesments-recent-trends-in-eu-investmentdecision-making/
Where is the Damage in Personal Data Theft?
- Scalable Capital (C-182/22 and C-189/22) and the Hurdles of Proving the NonMaterial Damage
Bilgesu Sumer
Introduction
On 20 June 2024, the Court of Justice, in Joined Cases Scalable Capital (C-182/22 and C-189/22) delivered a pivotal ruling on the right to compensation for non-material damage under Article 82 of the GDPR, resulting from a personal data breach in a trading application. The judgment sheds light on the conditions necessary for awarding compensation where the personal data are merely obtained by third parties, and the interpretation of ‘identity theft.’
In 2020, the applicants opened digital accounts in the German company, Scalable Capital’s digital app, by providing personal data, in particular their names, dates of birth, postal addresses, email addresses and digital copies of their legal identity cards. In the course of a data breach caused by unknown third parties, those personal data were compromised.
The questions of the German referring courts can be categorised into two main areas. Firstly, with its first four questions, it inquired about the nature and function of the compensation to be awarded under Article 82 for cases involving minimal non-material damage. Secondly, it sought more clarity regarding the meaning of identity theft as mentioned in recital 75 of the GDPR, and the relationship between identity theft and compensation.
The decision, while consistent with the previous case law, might create an additional challenge for data subjects to prove the specific damage and in turn risks reducing the compensation for personal data theft to symbolic amounts. Moreover, the Court overlooks the nuanced distinctions made in other relevant disciplines, such as cybercrime, when classifying identity-related data breaches. These distinctions could help clarify the types of breaches that might give rise to compensation.
1. Consistency with the three established conditions of non-material damage under Article 82(1)
The Court, in the recent years and in view of various different circumstances, has had several opportunities to rule on similar cases in relation to non-material damage. However, the previous cases concerned the use of personal data in an unlawful manner after the first seizure of personal data. For instance, in the case Natsionalna agentsia za prihodite (C-340/21), the data breach occurred as a result of cyberattack and the personal data were published online. In the case Österreichische Post (C-300/21), the data were also published and this allegedly had an impact on the reputation of the data subject. In that sense, Scalable Capital diverges from the previous case law, as according
to the defendant, SC, there is no evidence of the data being misused yet. This nuance was the main confusing point for the referring court regarding the interpretation of identity theft mentioned in recitals 75 and 85.
Scalable Capital is consistent with the previous case law of the Court. The Court clearly repeats the three previously established conditions that are necessary to invoke Article 82, namely:
(i) The right to compensation under Article 82 of the GDPR is strictly compensatory, based on the actual damage suffered, rather than providing ‘personal satisfaction’ to alleviate feelings of injustice experienced by the data subject due to the data breach. Hence, drawing on its decisions in Natsionalna agentsia za prihodite (C-300/21), Österreichische Post (C-340/21), Gemeinde Ummendorf (C-456/22), and Krankenversicherung Nordrhein (C667/21), the Court reiterated that a claimant must prove a GDPR infringement and show that they suffered material or non-material damage directly caused by the infringement.
(ii) The compensation in question could be a symbolic one where the damage occurred is minimal, enabling the possibility of awarding small amounts of compensation.
(iii) The damage suffered by the data subject does not have to reach a certain degree of seriousness.
As will be discussed below, these cumulative conditions might create confusion as regards the extent of the damage and compensation when the data are only unlawfully processed by third parties, but are not used further.
2. Personal Data Theft does not Amount to Identity Theft, but Identity Theft Equals Identity Fraud
In its fifth question, the referring court sought interpretation of the concept of identity theft and the conditions under which it could give rise to compensation. Scalable Capital argued that impersonation should be considered the primary element of identity theft, a term mentioned but not defined in recitals 75 and 85.
According to the Court, following the Opinion of Advocate General Collins, there is no distinction between identity theft and fraud; they are interchangeable, and the lists in the recitals are non-exhaustive. Nevertheless, within the meaning of recital 75, identity theft requires an offender to have actually assumed the identity of the person concerned. Mere possession of personal data does not alone constitute identity theft. Therefore, abstract loss of control over personal data does not directly imply identity theft or fraud. However, this interpretation does not preclude a possibility of compensation in cases of personal data theft. Consequently, compensation for nonmaterial damage under Article 82 should be assessed regardless of the existence of identity theft.
3. The Court overlooks the Nuances in Identity-Related
Data BreachesTop of Form
Such interpretation of identity theft gives rise to several observations. First, the Court’s interpretation of identity theft clearly diverges from the dominant scholarly views and overlooks the nuances between identity-related data breaches and crimes. When interpreting identity theft, it is reasonable to argue that data protection terminology should align closely with concepts used in related fields such as cybercrime. Although the purposes of these
disciplines differ, both link the seriousness of a crime to the severity of the resulting damage. In cybercrime, the gravity of an offence is often assessed based on the extent of the harm it causes. Moreover, there is no doubt that data breaches typically occur due to such crimes.
According to the most predominant views in this domain, identity theft differs from identity fraud, and most data breaches where ‘hacking’ occurs is considered as the preparation phase of identity theft (See: Koops et al. 2009, p.16-17). Different identity-related data breaches produce different level of damages. For instance, the breach of biometric data risks more than the simple email addresses. The referring court in question takes the view that the data stolen are relatively sensitive (Advocate General Collins Opinion, para 7).
Second, the actions that can be taken with the stolen data following a breach significantly impact the seriousness of the damage and, consequently, the compensation awarded to the data subject. Similarly, under the principle of security (Article 5(1)(f), a data controller is responsible for implementing safeguards to protect personal data from unlawful access by third parties. (Case C-340/21 VB v. Natsionalna agentsia za prihodite). Moreover, the data controller bears the burden of proving that the security measures are implemented appropriately. Following this, the measures taken to mitigate further damage by the controller, after the incident, requires more attention to assess the extent of damage.
By considering these elements, the assessment of non-material damage can better reflect the true impact on the data subject, ensuring that compensation aligns with the actual harm suffered. However, the Court’s interpretation, which wipes away the differences between the concepts of identity theft and fraud, misses the opportunity to align itself with the interpretations of more established literature. Accordingly, it fails to shed light on the confusion surrounding the extent of compensation to be granted in cases where personal data only have been stolen but not used further.
4. The paradox is in the detail: The burden on the data subject in the case of a personal data theft
There is no doubt that the current interpretation of the relationship between infringement and damage aims to facilitate the exercise of the right under Article 82. However, the judgment creates confusion regarding how symbolic compensation can fully compensate for minimal damage suffered. Symbolic compensations are typically intended to convey a sense of justice rather than to fully compensate for damage. Thus, the findings might leave national courts more confused than before.
More importantly, this interpretation could undermine the ability of data subjects to effectively exercise their rights. In cases of personal data theft, establishing a causal link between damage and infringement becomes exceptionally challenging for the data subject. This is specifically because data misuse is not evident, but highly possible. Data subjects must prove emotional distress even if their personal data is merely obtained without further use, potentially obstructing their right to compensation. In other words, proving non-material damage is particularly difficult in cases where personal data is obtained but not misused. In circumstances involving the processing of sensitive data, such as the one at hand, emotional distress is almost unavoidable. For these reasons,
one can argue that a distinction based on the sensitivity of the data stolen should be made to help clarify the extent of the non-material damage.
Conclusion
The Court’s reasoning aligns with previous case law, reaffirming that, to claim compensation, a data subject must prove the infringement, the damage suffered, and a causal link between the two. Furthermore, the Court confirmed that there is no minimum threshold for the seriousness of non-material damage to qualify for compensation, which theoretically broadens the scope of eligible claims.
Nonetheless, the Court overlooks the distinction between the several concepts regarding identity-related data breaches, which creates confusion around the identity-related crimes. On the other hand, a rather more significant legal issue lies in the interpretation that non-material damage does not have to meet a certain level of seriousness, while the mere theft of personal data might be sufficient to warrant compensation, provided that the data subject can prove the damage. This interpretation might present a challenge for data subjects who must demonstrate the extent of their harm, which is the suffering and anxiety around the data breach. Specifically, proving damage becomes complex and abstract in cases where personal data has been stolen, but not yet used for further criminal activities – for instance, in the case of identity fraud, which, according to the literature, would typically involve the misuse of the stolen data.
Another undesirable consequence of this interpretation may be that national courts might award symbolic compensation in situations where any personal data is stolen, since there is no clarity on how to assess the actual damage in such cases.
Bilgesu Sumer is a doctoral researcher at the KU Leuven Centre for IT & IP Law.This project has received funding by the European Union’s Horizon 2020 research and innovation program under the Marie Sklodowska-Curie Grant agreement No 860315.
Sumer, B.; “Where is the Damage in Personal Data Theft? - Scalable Capital (C-182/22 and C-189/22) and the Hurdles of Proving the Non-Material Damage”, EU Law Live, 01//08/2024, https://eulawlive.com/51644-2/
Vigilantibus non Dormientibus Iura Succurrunt: Are National Filtering Mechanisms for the Access to the Preliminary Ruling
Procedure Admissible? AG Opinion in Case C-144/23 Kubera
Tanja Hilpold
The Opinion of Advocate General Emiliou, delivered on 18 June 2024 and seemingly confirming the judgments in CILFIT and Consorzio Italian Management, in reality proposes a re-orientation of considerable dimension as to the legal assessment of several elements characterising the preliminary ruling procedure. While this Opinion contains surely many highly interesting ideas and considerations, it is argued here that national ‘filtering mechanisms’ for access to the preliminary ruling procedure, seen positively by Advocate General Emiliou if they respect some conditions, are generally highly problematic and the Court of Justice of the EU (‘Court’) should stop short from any limitation in the effective access to this Court.
1. Background
The question was raised whether filtering mechanisms at a national level are compatible with the third paragraph of Article 267 TFEU, id est with the duty of last-instance courts to make a request for a preliminary ruling to the Court. The applicant, Kubera, asked the Slovenian Supreme Court to refer questions to the Court as an important issue presented in the case had not been addressed in either EU case law or national case law. The Slovenian Supreme Court argued that national law does not allow the applicant to be granted leave to bring an appeal if the requirements laid down by national law are not met. However, the question arose whether a national court of last instance, when ruling on the application for leave to bring an appeal on a point of law, must also verify the substance of the party’s request in order to assess whether it is required to make a request for a preliminary ruling under the third paragraph of Article 267 TFEU. Moreover, the Slovenian Supreme Court wondered whether, in accordance with Article 47 of the Charter, it must state reasons if it concludes that the conditions for a preliminary ruling are not met.
2. Setting the Stage: Filtering Mechanisms at National High Courts as a Double-Edged Sword – Efficiency vs. Full Access to Justice
As Advocate General Emiliou correctly pointed out, the organisation of justice in the Member States falls within the competence of the Member States (point 26). He furthermore emphasised again, in accordance with settled case law, that the preliminary ruling procedure is a form of dialogue between courts and cannot be regarded as ‘a means of redress available to the parties to a case pending before a national court’ (point 77). The parties to the national proceedings have, indeed, no subjective right to ask a national court to make a reference to the Court of Justice. Therefore, the mere fact that a party contends that the dispute gives rise to a question concerning the
interpretation of EU law does not mean that the court or tribunal concerned is compelled to consider that such a question has been ‘raised’ within the meaning of Article 267 TFEU (point 77).
Nonetheless, the dialogue procedure between national courts and the Court established by Article 267 TFEU has to be taken seriously; it is not a mere faculty by the national courts of last instance to engage with the Court if the conditions mentioned by Article 267 TFEU are met.
In fact, as the Advocate General further explained, this procedure ‘pursues […] a dual objective: (i) a macro objective, of a prominent public nature, to ensure the unity, consistency and autonomy of EU law; and the inextricably linked (ii) micro objective, mainly of a private nature, to guarantee the effective judicial protection of individuals in the field of EU law’ (point 80).
Against that backdrop, the increasing tendency by national courts of last instance to introduce so-called filtering mechanisms has to be evaluated primarily also from the viewpoint of EU law. The need for such filtering mechanisms is somewhat persuading: they should allow the higher courts to tackle their excessive workload by the selection of the cases they are prepared to hear and decide on. From the perspective of EU law, the decisive question is how these filtering mechanisms should be structured in order to make sure that they are in complete harmony with Article 267 TFEU.
As will be shown, in order to reconcile all the contrasting interests and goals that are at play, a tightrope walk must be undertaken that might imply, if some compromise should be feasible, a far-reaching re-interpretation of the settled jurisprudence in this field.
The ‘filtering’ of cases means a reduction in number at an early stage, that is to say, the tossing out of cases before they are fully heard, limiting access to justice. Is such an approach reconcilable with the guarantees offered by Article 267 TFEU, especially in view of the most recent jurisprudence? Yes, according to Advocate General Emiliou, if certain conditions are met and if, in substance, care is taken to ensure that the third paragraph of Article 267 TFEU is not being circumvented. It is of paramount importance that national rules adhere to the principle of equivalence, according to which questions of national law and EU law are addressed in the same manner, and to the principle of effectiveness, which requires that national rules do not render impossible or excessively difficult the exercise of rights conferred by EU law (point 28).
As a result, Advocate General Emiliou concludes that national filtering mechanisms, interpreted and applied in conformity with the third paragraph of Article 267 TFEU and the judgments in CILFT and Consorzio, are compatible with EU law. National filtering mechanisms breach that third paragraph if they do not require national courts of last instance to examine whether they are under a duty to make a request for a preliminary ruling, where a party has properly raised an issue of EU law, presented more than one sufficiently plausible interpretation and asked the national court to make a reference (point 121). Furthermore, the Advocate General reiterates (in conformity with the judgment in Consorzio) that national courts of last instance must provide reasons when they decide to refrain from referring questions for a preliminary ruling, qualifying this duty, however, to a considerable extent.
As will be shown, the considerations made by the Advocate General may seem appealing in several perspectives, but what seems convincing as a general rule reveals a series of serious challenges when implemented in detail.
3. Finding Space for Filtering Mechanisms – Pros and Cons
3.1 Distinguishing between the ‘Interpretation’ and the ‘Application’ of EU law
As will be shown, Advocate General Emiliou presents his reasoning as being primarily based on Consorzio According to the author of this contribution, in reality the Opinion in Kubera goes considerably beyond that ruling and enters uncharted waters. A series of distinctions are made that should open some space for a filtering mechanism without undue restriction of access to the Court guaranteed by Article 267 TFEU. In the following, it will be examined up to which point these distinctions can be upheld.
A first differentiation is made between the interpretation and the application of EU law. According to Advocate General Emiliou, the duty of national courts of last instance to submit questions refers to the interpretation of EU law and not to the application of EU law. Consequently, filtering mechanisms may ensure that only genuine cases of interpretation of EU law end up before the Court.
The Advocate General derives this conclusion from Consorzio, where the Court stated that it is the interpretation of EU law – and no longer its application – that must leave no scope for reasonable doubt. According to Advocate General Emiliou, the nature of the preliminary ruling procedure has evolved. According to him, the respective change mirrors a ‘progressive re-conceptionalisation of the object and purpose of the preliminary ruling procedure and, consequently, of the scope of the obligation laid down in the third paragraph of Article 267 TFEU’ (point 101). He consequently states that national courts of last instance are not under a duty to refer a case to the Court if the case concerns a question on the outcome of a specific case, and thus on the application of EU law.
It is argued here that it is not so easy to distinguish between the interpretation and the application of EU law. While Advocate General Emiliou is aware of the difficulties in this field – interpretation and application often intermingle – he underscores the abstract differences between these two concepts and he is sure that this distinction can be mastered in practice (point 102).
For the Advocate General, interpretation amounts to determining, at a certain level of abstraction, the meaning and scope of a legal provision, while application is ‘the activity of making a legal provision, whose meaning and scope have been determined, operational in a given dispute by drawing the specific consequences for a particular set of facts’ (point 102).
It does, however, raise doubts as to whether this intellectual sequence in the process of application of law, as compelling as it might appear on logical grounds, can be put seamlessly into practice. Making a norm operational goes often hand in hand with its interpretation and it is not easily possible to attribute these different tasks to different actors. As a consequence, there is the danger that in the future national courts could try to defend their competences against the Court by qualifying as questions of application of EU law what in reality would
be questions of interpretation. In other words, this approach could become an easily available instrument to circumvent the obligations set out in Article 267 TFEU. It must be assured that, in all situations in which questions of application raise also issues of interpretation, which is often the case, the Court’s competence remains intact.
2. Attributing larger duties to the parties
There can be no doubt that the workload of national courts of last instance can be further reduced if it is left to the parties to initiate the dialogue with the Court. This approach would imply a certain degree of diligence by the parties. Advocate General Emiliou identified elements in the Court’s jurisprudence which would support such a line of action by the Court.
According to the Advocate General, in Consorzio the Court further emphasised the role of the parties within the preliminary ruling procedure. In his words, the Court assigned ‘first and foremost’ to the parties the task of raising an issue of EU law and of alleging sufficient information that a reasonable doubt as regards the interpretation of EU law exists (point 106). He buttressed his assertion by referring to the paragraphs 44, 49 and 51 of the Court’s judgment in Consorzio. However, it is questionable whether such an interpretation results from the wording of this judgment. In paragraph 44, the Court merely mentioned that national courts of last instance are not under a duty to examine all language versions of a provision and must take into account those divergences of which it is aware, in particular those put forward by the parties. The wording ‘in particular’ implies that this task is not reserved exclusively to the parties. Furthermore, a national court of last instance must be especially vigilant if it is made aware of the existence of diverging lines of case law concerning the interpretation of EU law (para. 49 Consorzio). In paragraph 51, the Court established the duty of national courts of last instance to state reasons when they decide to refrain from referring.
It is, therefore, unlikely that the specific considerations contained in the paragraphs 44, 49 and 51 of the Court’s judgment in Consorzio can be extended to a general rule devolving the obligation to act within a preliminary ruling procedure mainly to the parties, as the considerations by Advocate General Emiliou seem to imply.
The awareness of more than one interpretation of EU rules implies the necessity to engage in comparative studies and sophisticated inquiries. Should the Court follow the suggestions made by the Advocate General, in the future, the duties to act within the preliminary ruling procedure would be somewhat shifted from the national courts to the parties. This position is not unproblematic as there is also a general, public interest in clarifying the meaning of EU law. Furthermore, the possibility that national courts make a request for a preliminary ruling would be mainly reserved to the parties that are sufficiently vigilant. The underlying presumption is that the intricacies of EU law are perfectly known by the parties. Whether the principle vigilantibus non dormientibus iura succurrunt is or should be applicable in the context of the preliminary ruling procedure is questionable. The approach adopted by Advocate General Emiliou could surely be seen as a contribution to render the work by the national and EU judiciary more effective if ‘effectiveness’ is interpreted as relating to the number of cases adjudicated by courts.
However, if the enhancement of the role of the parties has, as a by-effect, the reduction of the number of cases decided on the merits and with full consideration of the relevant EU law interpreted in an EU-wide uniform and consistent manner, the approach suggested in the Opinion can hardly be seen as a contribution to the good administration of justice within the Union. In the long term, it may even run counter to the intention to reduce the workload – both of the national courts and that of the Court – as the solution of inconsistencies in the interpretation of EU law would thereby only be postponed.
Advocate General Emiliou’s statement that litigants ‘cannot expect national courts of last instance to regularly raise ex officio issues of EU law which they did not raise’ (point 107), merits further consideration as the adoption of this approach could lead to a problematic deficit of judicial protection within the EU.
As mentioned, the third paragraph of Article 267 TFEU is essentially based on the idea of a judicial dialogue between national courts and EU Courts. Excluding or limiting the competence of national courts to raise ex officio issues of EU law would disrupt this dialogue and run counter to the main essence of this procedure. Even though, in practice, it is often the parties to a proceeding that are asking national courts to refer a case to the Court, it shall be recalled that national courts can raise of their own initiative questions on the interpretation or validity of EU law and can decide ex officio to make a request for a preliminary ruling (see, for example, Salonia, C-126/80, para. 7), also when the parties remained inactive in this regard and even if they were against such a request in the first place. Article 267 TFEU does not give any preference to the parties for requesting that the national courts refer questions, nor does it preclude courts from acting ex officio in this sense.
In the view of the author, national filtering mechanisms are, in general, incompatible with the third paragraph of Article 267 TFEU if a national court of last instance is not under a duty to examine whether it has to refer a case to the Court. By requiring that ‘a party has properly raised a genuine issue of EU law, substantiating its arguments as to the existence of more than one sufficiently plausible interpretation of the relevant EU provisions’, and requiring further that a party has ‘expressly invited the national court to make a reference’ (point 121), Article 267 TFEU would be substantially modified and a dangerous loophole in EU judicial protection could emerge. The possibility of national courts to raise ex officio issues of EU law should remain a realistic option.
Advocate General Emiliou refers to the criteria established by the Slovenian civil procedural law (Article 367 ZPP) which should grant full hearing (and disapplication of the filtering mechanism) and voices the opinion that they could be interpreted in conformity with EU law (whereby they would correspond to the CILFIT criteria). It is, however, doubtful whether ‘substantive equivalence’ (if given at all in practice) would meet the requirements of EU law which demands that national law is in conformity with EU law also in formal terms. Both the applicants and the courts must know that the CILFIT criteria constitute the outer limits which allow for refusal to submit an interpretative question to the Court.
4. Obligation to State Reasons – Would it be Useful to Introduce Standard Formulae?
In principle, it is laudable that Advocate General Emiliou confirmed the jurisprudence in Consorzio as regards the obligation of last-instance courts to state reasons when they refuse to make a request for a preliminary ruling. He also identified, however, some potential for judicial economy and procedural efficiency and leeway for reasoning ‘in a rather summary and standardised manner’ (point 128).
Again, this is a highly delicate matter. While it is true that ‘the extent of the obligation to give reasons may vary according to the nature of the judgment’ (point 127, referring to the judgment of 23 October 2014, flyLALLithuanian Airlines, C-302/13, para. 52), care must be taken that the essential achievement by Consorzio in this field is not imperiled. To remark that the extent of the obligation to give reasons depends on the specific conditions of the case is to state the obvious. To develop a specific formula that would explicitly allow to limit the extent of the reasoning to be given may be overshooting and provide potentially an excuse for abuse. In any case, the purported gains in judicial economy have to be weighed against the losses in terms of effective judicial protection.
Advocate General Emiliou emphasises that the reasoning is of paramount importance for the litigants to understand the grounds for the rejection of their requests as they could still try to rely on other judicial remedies, for example on the action for State liability before the national courts or the infringement proceedings (points 131-132). However, in practical terms, having regard to the present state of development of the instruments mentioned, they do not offer a realistic opportunity to have the Court seized with the legal question at issue. It is rather the case that the obligation to provide detailed reasons has another objective, namely to oblige the respective national court of last instance to consider with the utmost care whether it is under a duty to make a request for a preliminary ruling, thereby making the ‘dialogue of the courts’ a reality.
5. Conclusion
Advocate General Emiliou is surely to be applauded for having confirmed the main tenets of Consorzio. At the same time, the attempt to find new avenues for judicial economy and procedural efficiency also has its merits and corresponds to initiatives supported in the past by many Advocate Generals and presently by several Member States. The great challenge is to strike an acceptable compromise between all the interests affected here, which implies the adoption of procedural techniques that are not always mutually reconcilable. According to the view taken here, Advocate General Emiliou’s Opinion has it merits for addressing a series of aspects of this discussion. For the time being, however, it might be too early to embark on this road. As shown, the Opinion contains large concessions in favour of ‘filtering mechanisms’ which come at the cost of effective judicial protection. It might be advisable to further work on what has been called the ‘micro objective’ of the preliminary ruling procedure, the effective judicial protection of individuals in the field of EU law.
In view of the complexity of EU law and the persisting need in many areas regulated by EU law to make the protection of the individual more effective, the bar for access to the Court should not be set too high. Most
people failing to obtain redress in matters regulated by EU law are not sleeping, but they lack the means and the knowledge to have effective access to this ever more important area of law.
Tanja Hilpold is a PhD Researcher in EU Law at the University of Luxembourg. E-mail: tanja.hilpold@uni.lu
Hilpold, T.; “Vigilantibus non Dormientibus Iura Succurrunt: Are National Filtering Mechanisms for the Access to the Preliminary Ruling Procedure Admissible? AG Opinion in Case C-144/23 Kubera”, EU Law Live, 30/07/2024, https://eulawlive.com/op-ed-vigilantibus-non-dormientibus-iurasuccurrunt-are-national-filtering-mechanisms-for-the-access-to-the-preliminary-ruling-procedure-admissible-ag-opinion-in-case-c-144-23-kubera/
Narrowing the Scope of Free Movement Restrictions? (C-598/22 - Società Italiana Imprese Balneari)
Vincent Delhomme
The Italian seafront, although public property, is known to be largely in the hands of private beach clubs and resorts. The beautiful coastline is dotted with umbrellas and sunbeds only accessible against payment of a hefty sum. Running a business at an Italian beach requires a concession, a lucrative activity whose profitability was reinforced by the long-standing refusal of Italian authorities to open these concessions to competitive tendering, in clear violation with EU law (see Promoimpresa, Joined cases C-458/14 and C-67/15; Autorità Garante della Concorrenza e del Mercato, Case C-348/22). The case at hand (C-598/22) deals with another aspect of Italian law, the rule whereby the property of irremovable structures constructed by concessionaires on public beaches is automatically transferred to the State after the expiry of the concession period, without any compensation. This, the Court ruled, does not constitute an unlawful restriction on freedom of establishment within the meaning of Article 49 TFEU.
Since 1928, Società Italiana Imprese Balneari, the applicant in the main proceedings, had been managing a seaside resort in the municipality of Rosignano Marittimo in Tuscany (trivial fact – the city is known for its ‘Solvay beach’, an unusually pristine beach whose white sand and turquoise waters result from decades of pollution from the nearby chemical plant). Over the years, the company built various structures on the State-owned land. Upon renewal of the concession, the structures were considered as irremovable and transferred to the public domain, thus resulting in an increase of fees that the applicant had to pay for the new concession. The applicant challenged the decision and, following an unsuccessful first instance judgment, appealed to the Council of State, the referring court in the present case. The applicant argued that the transfer of the structures without compensation was contrary to Articles 49 and 56 TFEU, as interpreted in particular by the Court in the Laezza judgement (C-375/14).
The Court’s answer is short on substance. Parts of the judgement are devoted to procedural skirmishes unsuccessfully launched by the applicant and the Italian government, to demand, respectively, to have the oral part of the procedure reopened and to have the request for a preliminary ruling declared inadmissible. On the question referred, the Court easily set aside Article 56 TFEU and the Services Directive (2006/123). The case clearly dealt with a situation of establishment – the concessionaire participates on a stable and continuous basis, for a relatively long period, in the economic life of the State where the beach is located (para. 44) – and the Services Directive was not applicable ratione temporis to the dispute at hand (para. 46).
The Court then went to recall the standard formula, whereby a measure, even if non-discriminatory, which ‘prohibits, impede or render less attractive’ the exercise of the freedom of establishment, must be regarded as
a restriction on that freedom (para. 48). This would not be the case, however, where such a non-discriminatory rule, which does not regulate the conditions concerning the establishment of the economic operators concerned, has potential restrictive effects which are ‘too uncertain and indirect’ (para. 49). How should the rule at hand be qualified? There was no element suggesting that the Italian rule was not applied similarly to all operators established on the territory (para. 50). It was also clear to the Court that the provision did not concern, as such, the conditions of establishment of concessionaires (para. 51). The main question was therefore the presence, or not, of restrictive effects sufficiently certain and direct for the rule to fall within the scope of Article 49 TFEU.
The Court considered that such restrictive effects were absent in the present case (para. 56), relying on two interconnected arguments. First, the Italian rule gives effect to the fundamental principle of the inalienability of the public domain. Were a concessionaire permitted to retain ownership of the irremovable structures built on that domain, this would go against its public nature and its practical availability (paras 53-54; Opinion of Advocate General Capeta (C-598-22), point 49). This means that SIIB was aware, from the moment the concession agreement was concluded, that the licence granted to it was precarious and revocable (para. 55). Second, the Italian rule provides for the possibility for the concessionaire and the public authority to agree that the transfer of irremovable structures will give rise to compensation, meaning that, for the Court, the rule could not be regarded as a type of compulsory transfer (para. 57). Finally, both the Court and the Advocate General rejected the application of Laezza to the case at hand, a judgement rendered in an altogether different context – games of chance – involving a rule applicable to both tangible and intangible property, more akin to a penalty (paras 60-61; Advocate General, points 72-83). The rule was therefore deemed not to constitute an unlawful restriction within the meaning of Article 49 TFEU.
While one can agree with the conclusion reached in this case – the rule is plainly non-discriminatory, it does not govern access to the activity at hand and its restrictive effects are likely to be modest, at best – the Court’s reasoning is perhaps not fully convincing. Rather than focusing on the rationale for the rule, its foreseeability and its consensual aspect, elements which are more closely related to the justification for a restrictive rule than to its restrictive effects, the Court could have analysed these effects in greater details. As aptly argued by the Advocate General, considering the length of the concession – its profitability, one may add – and the knowledge of the concessionaire that it will lose any irremovable structure subsequently built, the rule would indeed not deter an investor from bidding for the award of the concession (points 52-53).
In a subtle, yet visible change of approach, the Court appears, in recent years, to more readily reject claims made by economic operators which concern rules unconnected to trade between Member States, with only hypothetical restrictive effects on free movement. Such is the case of the rule at hand here. To do so, the Court increasingly relies on the ‘too uncertain and indirect’ doctrine, as well as, in the field of services and establishment, on the Mobistar rule (see e.g. Airbnb Ireland and Airbnb Payments UK (C-83/21), see the analyses; Admiral Gaming Network (C-475/20), see the analysis). A quick look at the Curia search engine reveals that the Court applied the ‘too uncertain and indirect’ doctrine twice in favour of a Member State in 2019, four times in 2022 and already two times in 2024. This is more than between 2000 and 2019.
Whether this reveals a broader trend remains to be seen. The Court’s willingness to uphold national measures that treat all economic operators equally and only have a limited bearing on trade should be commended. It is more respectful of Member State autonomy and limits the scope of application of EU law to situations with a clear cross-border aspect. EU law and the internal market have reached a degree of maturity that should allow to grant more leeway to national authorities. At the same time, more attention given to the actual effects of a rule might be in tension with the long-standing rule that a restriction to free movement exists, within the meaning of the Treaty, ‘even though the hindrance is slight’ (Van de Haar, 177 and 178/82, para. 13). As always, the balance must be carefully struck. It is the delicate but necessary task of the Court of Justice.
Vincent Delhomme is Assistant Professor, Leiden University, the Netherlands; Visiting Professor, UCLouvain, Belgium
Delhomme, V.; “Narrowing the Scope of Free Movement Restrictions? (C-598/22 - Società Italiana Imprese Balneari)”, EU Law Live, 31/07/2024, https:// eulawlive.com/op-ed-narrowing-the-scope-of-free-movement-restrictions-c-598-22-societa-italiana-imprese-balneari/