TABLE OF CONTENTS
IN-DEPTH:
The Third Time is Not the Charm? The End of Czech Pocket-Lighter Saga and the Dispute Over Union’s Own Resources in Commission v. Czech Republic
Nika Bačić Selanec
Treating Building Renovation Works as immovable Property acquired as capital Goods for VAT Adjustment Purposes: the ‘Substance over Form’ Approach to guarantee the Principle of Neutrality
Chiara Cinotti
Translating Komstroy to international Law: Declaration on the legal Consequences of Komstroy
Mark Konstantinidis
‘Treat me like a Stranger and that feels so rough’: The Commission may delay sufficient Motivation without incurring Liability (to protect the EU Budget?) (IMG v Commission, T-509/21 and T-381/15 RENV II)
Maria-Luisa Sánchez-Barrueco
General Court upholds the restrictive Measures against Belarus’ State-owned Potash Producer
Celia Challet
SYMPOSIUM ON THE SELECTION OF EU JUDGES AND THE 255 COMMITTEE:
The Role of the 255 Panel: some Observations
Allan Rosas
SYMPOSIUM ON THE THE APPLE STATE AID CASE (C -465/20 P):
The poisoned Apple: is the Court of Justice seeking Justice through legal Misinterpretation?
Romero J.S. Tavares
The Apple Case: ‘Wrong’ Questions, misguided Answers, regulatory Distortion?
Scott Wilkie
THE LONG READ:
Moribunds Live Longer: 30 Years of the European Economic Area
Carl Baudenbacher
HIGHLIGHTS OF THE WEEK
IN-DEPT H
The
Third Time is Not the Charm? The End of Czech PocketLighter Saga and the Dispute Over Union’s Own Resources in Commission v. Czech Republic
Nika Bačić Selanec
On 5 September 2024, the Court of Justice has delivered its judgment in European Commission v. Czech Republic (C494/22 P ). The judgment finally ended a long-lasting dispute between the Czech authorities and the Commission over who bears the costs of never recovered custom duties for 28 cases of pocket-lighters from China, imported into the EU between 2005 and 2007 from Laos as a falsely declared country of origin in circumvention of antidumping duties on Chinese merchandise.
After several legal twists and turns, the final outcome was not favourable to the Czech Republic.
This seemingly simple budgetary dispute of a Member State with the European Commission ended up being an important legal battle in Luxembourg, fought on three fronts, and resulting in important developments of Union law as a matter of both ‘principle and practice’ on national budgetary obligations, and, more generally, on remedies available to the Member States against the Union’s institutions under the Treaties.
Background
Custom duties are, in principle, a ‘traditional own resource’ of the European Union which, despite being ‘EU money’, depend on the collection and transfer to the EU budget by the national authorities. Under the standard process, the Member States should, after establishing the duty, automatically transfer due amounts to the Commission’s accounts or, in the terminology of the EU’s budgetary rules ‘make the established amounts available to the Commission’ (see here, here and here). In the present case, the problem occurred after an importing company Baide Lighter Industry from Laos, and its European subsidiary set up in Prague, were marked a risk profile for circumventing custom legislation. A coordinated national and OLAF investigation soon discovered proof of Chinese origin of pocket lighters the company had been importing into the European Union from Laos, via Thailand, thereby evading anti-dumping duties. By the time the investigation was over, when OLAF finally issued its report (some 10 months after the evidence was originally discovered in a joint mission to Laos), the Czech subsidiary of the company was shut down. By then, the prospect of recovering the duties was basically non-existent. The question was, then, who should bear the costs –should the loss fall on the Union budget, or the Member State who failed to act vigorously (and promptly enough?) in establishing the amounts of duties while there still was a chance to recover them. Under the system of own resources, Member States should credit the Commission’s accounts as soon as the duty is established by the customs authorities, even if the disputed amounts are not later recovered. Still, under Article 17(2) of Regulation 1150/2000, Member States can be relieved of this
obligation, but only in a case of force majeure or reasons which cannot be attributed to the national authorities. Another question was were the national authorities required to establish the duty –as soon as they discovered the requisite information about the imported products during the joint investigation, or were they allowed to wait for OLAF’s final report which included all the collected evidence of misconduct? The answers to these questions would determine the final outcome of the dispute.
Due to the structure and nature of the budgetary system of Union’s own resources, the Czech Republic had no choice but to initially process the payment and –immediately after establishing the duty– credit the disputed amount of about 1.5 million euros to the Commission’s account. Still, it simultaneously expressed its reservations disputing the payment’s legal basis, initiating three actions against the Commission. First was the action for annulment under Article 263 TFEU against the letter of the Commission requesting the payment. The second was the action for the Commission’s failure to act under Article 265 TFEU, on account of its refusal to initiate infringement proceedings against the Czech Republic, giving the state a standing in court to challenge the budgetary obligation’s legal basis. The third –and present– action claimed Union’s unjust enrichment requesting compensation based on Articles 268 and 340 TFEU.
Which judicial remedy to use?
The first two routes proved to be a dead end. In the first proceedings seeking annulment of the Commission’s letter under Article 263 TFEU, the Court of Justice effectively cut the tie by deciding which of the three legal avenues are the proper judicial remedy available to the Member States seeking a review of validity of the legal basis for their otherwise mandatory budgetary payments. In the landmark judgment in Czech Republic v Commission (C575/18 P), decided in 2020, the Court of Justice confirmed that a Member State with a budgetary disagreement with the Commission cannot have recourse to either actions for annulment, or force the Commission to initiate infringement proceedings for budgetary obligations which were, moreover, already paid out and hence technically complied with, making the question of an ‘infringement’ redundant. Instead –the proper legal route for dissatisfied national authorities would be to seek Luxembourg’s judicial review of the budgetary payment under the procedure claiming Union’s unjust enrichment, and requesting compensation under Articles 268 and 340 TFEU (for a detailed analysis of this judgment and its relevance in creating a more complete system of judicial remedies under the Treaties, see here). The first case was hence closed, the second action for failure to act was soon withdrawn, and the final dispute on merits was to be resolved in the third and final action claiming Union’s unjust enrichment.
In that case, the present one, the General Court first decided in the favour of the Czech Republic, upholding in part their request for repayment of the disputed amount, approximately 700 thousand out of the requested 1.6 million euros (see the prior op-ed analysing the judgment here). In a nutshell, the General Court considered that Czech Republic could have waited for the belated OLAF’s report before establishing the duty, and could later invoke Article 17(2) of Regulation 1150/2000 to be released from its budgetary obligation, as the reasons for not being able to recover the duties (when during the course of the investigation, the debtor company was shut down) were not ‘attributable’ to that Member State. The Commission appealed on two grounds –first, that Article 17(2)
exemption may apply to the Member States only if they themselves have not been belated in establishing the duty, and second, that reasons for non-recovering the duties were indeed attributable to the Czech Republic, as their national authorities should not have passively waited to receive the evidence in a belated investigation report from OLAF, but should have immediately requested these evidence obtained in a joint mission and use them to timely establish (and recover) due amounts.
Final outcome
Following the Opinion of AG Ćapeta, the Court of Justice (or “the Court”) agreed with the Commission, upheld both grounds of its appeal and reversed the judgment of the General Court.
As to the first ground, the Court concluded that a Member State cannot be released from its obligations to make Union’s budgetary entitlements available to the Commission if these entitlements which have not been properly entered into the Commission’s accounts, but have been established belatedly. To support this, the Court relied on two arguments. The first was the burden of proof in actions for annulment, which ought to lie with the Member States. And indeed, standard evidentiary rules require that claimants actually prove that the Union’s enrichment has an invalid legal basis –a Member State ought to prove that its impoverishment is not justified by its obligations under Union law, that it was not required to make the disputed amounts available to the Commission and that all its obligations in that respect have been complied with. Then the Court recalled the specific characteristics of the Union’s budgetary system. Because the Member States are solely responsible for managing the system of Union’s own resources –their obligations must be interpreted strictly– as regards the establishment of the entitlements, their entry in the accounts, and making them available to the Commission. National duties to enter the requisite amounts into the Commission’s accounts are based on a premiss that Union’s entitlements have already been established in accordance with the applicable legislation, and in good time. In other words, Article 17(2) exemption may be relied upon by the Member States only when their entries into the Commission’s accounts have been carried out in full compliance with EU law.
As to the second ground, the Court clarified that national obligations to establish the entitlements to resources arise as soon as the conditions concerning customs regulations have been met (which, under the Customs Code, occurs as soon as the customs authorities have the necessary particulars to calculate the amount of duties and determine the debtor). This means that the Czech Republic was supposed to establish the entitlements in the days following the return of the inspection mission from Laos, and was not entitled to passively await for months for the communication of OLAF’s final report along with the evidence, without ever requesting the prior communication of that evidence itself (all the more so as its national authorities participated in the joint mission for retrieving them). Under the principle of sincere cooperation from Article 4(3) TEU, Member States are obliged to take all the measures necessary to guarantee the application and effectiveness of EU law. This entails taking all the ‘effective’ (and requisite) measures to gather the information itself, without being able to rely on the OLAF’s delay in communicating the report. OLAF’s supporting and coordinating role in such investigations cannot alter the distribution and balance of responsibilities between the national and the EU level, and cannot
relieve the national authorities from their responsibilities to manage the system of own resources. The background logic comes down to the traditional and seminal principle of EU law, estoppel: a Member State cannot ‘profit from its own inaction to justify its failure to make the own resources available.’ For the Union’s budgetary system to work, national vigilance is required and there is no ‘excuse for being late’, even if OLAF was itself lax in the exercise of its activities.
Overall, the long legal battle ended in the Commission’s favour. For the Czech Republic, the third time was simply not the charm.
Nika Bačić Selanec is Assistant Professor at the Department of European Public Law, University of Zagreb – Faculty of Law, and holder of the Jean Monnet Module on ‘EU Constitutional Law and Methodology’
SUGGESTED CITATION: Bačić Selanec, N.; “The Third Time is Not the Charm? The End of Czech Pocket-Lighter Saga and the Dispute Over Union’s Own Resources in Commission v. Czech Republic”, EU Law Live, 09/10/2024, https://eulawlive.com/op-ed-the-third-time-is-not-the-charm-the-endof-czech-pocket-lighter-saga-and-the-dispute-over-unions-own-resources-in-commission-v-czech-republic/
Treating Building Renovation Works as immovable Property acquired as capital Goods for VAT Adjustment Purposes: the ‘Substance over Form’ Approach to guarantee the Principle of Neutrality
Chiara Cinotti
1. Introduction
In the judgment on Drebers (C-243/23), the Court of Justice of the European Union (‘the Court of Justice’) ruled on the VAT adjustment mechanism.
In particular, the judges were called upon to give a preliminary ruling on the question of the compatibility with Articles 187 and 189 of the VAT Directive of the legislation of a Member State (in this case, Belgium) which allows the longer adjustment period (which under Belgian law is fifteen years) for VAT on immovable property acquired as capital goods to be applied only when the construction works result in a ‘new building’ and not when they result in a significant extension and/or substantial renovation of the existing building, even though the duration of the economic life is identical to that of a new building and the works carried out are depreciated over the same period as a new building. The Court of Justice was also called upon to consider, as a second step, the question whether, in such a circumstance, Article 187 of the VAT Directive could have direct effect.
In the judgment under review, the Court has decided in favour of applying the long adjustment period provided for immovable property acquired as capital goods –where implemented by the Member States’ rules– also to construction works which result in a significant renovation of the property, because works of such importance constitute services that have similar characteristics to those normally attributed to capital goods and can be assimilated to them by virtue of Article 190 of the VAT Directive. They have also recognised Article 190 as having direct effect.
2. The case
Between 2007 and 2015, L BV, a Belgian law firm, undertook major renovation works on an immovable property used partly for the purposes of the economic activity and partly as the owner’s residence. The works consisted of the renovation of the main building and an intermediate building and the construction of a newly build basement, a glass annex and a lift shaft.
Initially, L BV did not deduct the VAT paid on the work because Belgian law exempted the profession of lawyer from VAT. On 1 January 2014 the VAT exemption was abolished and, as a result, L BV also became a taxable
person for VAT purposes. Following its registration as a taxable person, the company adjusted its VAT deductions, believing that it was in time to do so because the significant building renovation works it had carried out should have been qualified as immovable property acquired as capital goods, subject to the adjustment period of fifteen years (and not the shorter five-year period for investment goods in general).
The Belgian tax authority, on the other hand, denied L BV the right of adjustment because, in their view, the construction works had not resulted in a ‘new building’ but had only improved and renovated the existing building. They could not, therefore, qualify them as immovable property acquired as capital goods but only as capital goods, the adjustment period for which is five years. For this reason, the law firm was considered out of time for the VAT adjustment.
The case was brought by LB V before the Belgian Court of First Instance, which recognised L BV’s right to adjust the VAT regarding some of the construction works, which could be considered as parts of a newly constructed building (the glass annex, the lift shaft and the renovated adjoining building).
The decision was appealed by the Belgian tax authority. The Belgian Court of Appeal, doubting the compatibility of Belgian law with Articles 187 and 189 of the VAT Directive, requested for a preliminary ruling on the questions set out above.
3. The ruling of the Court of Justice
A brief introduction should be made to the legal framework. Regarding the mechanism of adjustment of VAT deductions, Article 187 provides for an adjustment period of five years for capital goods. In contrast, for immovable property acquired as capital goods, the length of the period serving as a basis for adjustment may be extended by Member States up to twenty years. In addition, Article 190 gives Member States the option of considering services with characteristics similar to those normally attributed to capital goods as capital goods. The latter is precisely the rule on which the Court of Justice based its decision.
The judges base their arguments on the right of deduction, which is a fundamental principle of the common VAT system because it guarantees the neutrality of the tax for all economic activities. The adjustment mechanism is also an expression of the neutrality principle because it increases the accuracy of deductions.
Turning then to construction works (when they have been subject to VAT as supplies of services and not as supplies of goods), the Court of Justice clarifies that they cannot fall within the notion of capital goods, because they constitute services, irrespective of the way in which capital goods may have been defined by the national legislation (according to Article 189 of VAT Directive). Member States may, however, exercise the option granted to them by Article 190 and assimilate those works to the notion of capital goods, a notion which, according to the Court of Justice, is general and therefore also covers immovable property acquired ad capital goods.
For the judges, therefore, works involving major alterations to an existing building must be assimilated to immovable property acquired as capital goods for the purposes of the deduction adjustment mechanism in order to
avoid discriminatory treatment for VAT purposes between taxable persons engaged in similar economic activities. Moreover, although Article 190 gives to Member States a mere faculty and its implementation - as regards the possibility of assimilating those kinds of services to immovable property acquired as capital goods – depends on the fact that the Member State has provided in national law for a longer adjustment period for the immovable property acquired as capital goods, according to the Court of Justice its content is unconditional and sufficiently precise and, therefore, the rule is capable of having direct effect.
4. Remarks on the ruling of the CJEU on VAT adjustment mechanism
This ruling is to be welcomed because the Court of Justice adopts a ‘substance over form’ interpretative approach, holding that construction works that result, in substance, in a new building may also be assimilated to immovable property acquired as capital goods for VAT adjustment purposes.
On other occasions, the Court of Justice has interpreted the application of the VAT adjustment mechanism by giving priority to the substance of the transactions, such as in cases where the taxable person has been incapable to use the goods or services that gave rise to the deduction due to circumstances that were not in his control (Imofloresmira C-672/16 and ITH Comercial Timisoara SRL C-734/19) or where a taxable person abandons an investment project and the projected economic activity never takes place (Inzo C-110/94 and Ghent C-37/95) or, more generally, when there are the substantive requirements of the right of deduction, but there are not some of the formal requirements imposed (Salomie C-183/14).
As the Court of Justice also points out, the provision for a longer maximum adjustment period was introduced precisely in order to adapt the VAT adjustment mechanism to the intrinsic characteristics of immovable properties acquired as capital goods, which have a longer economic life span than other goods (see also Centralan Property C-63/04), and it is agreed that – if implemented by Member States – this distinction should be extended to all those transactions that achieve a similar result. Only in this way, in fact, does the right of deduction fulfil the fundamental function of ensuring the neutrality of the common VAT system and does not discriminate between economic operators. Although the implementation of Article 190 is left to the discretion of the Member States, the Court of Justice has already underlined in other rulings that, when laying down the detailed rules of the adjustment, the Member States must comply with EU law and its fundamental principles (SEB Bankas C-532/16 on Article 186 of VAT Directive; Securenta C-437/06 on the allocation of pro-rata) and may only impose restrictions on the principle of neutrality in cases expressly provided for in the VAT Directive (Nibera Handelscompagnie BV C-385/09).
Finally, the recognition of direct effect to Article 190 is interesting. Although the rule is subject to the implementation by the Member States, its reading in conjunction with Article 187 and the principle of neutrality allows it to be sufficiently clear, precise and unconditional so as to prevent the discretion of the Member States from leading to any discriminatory treatment between economic operators.
Chiara Cinotti, PhD student in tax law at ‘Sapienza’ - University of Rome, ‘cultore’ of tax law at Univerisity of Florence, tax lawyer partner of ‘Dorigo e Associati’ in Florence.
SUGGESTED CITATION: Cinotti, C.; “Treating Building Renovation Works as immovable Property acquired as capital Goods for VAT Adjustment Purposes: the ‘Substance over Form’ Approach to guarantee the Principle of Neutrality”, EU Law Live, 08/10/2024, https://eulawlive.com/op-ed-treatingbuilding-renovation-works-as-immovable-property-acquired-as-capital-goods-for-vat-adjustment-purposes-the-substance-over-form-approach-toguarantee-the-prin/
Translating Komstroy to international Law: Declaration on the legal Consequences of Komstroy
Mark Konstantinidis
Introduction and background
The relationship between EU law and investment arbitration has been fraught. In Slovak Republic v Achmea (C284/16), the Court of Justice of the EU (‘the Court of Justice’ or ‘the Court’) found that provisions in bilateral investment treaties (‘BITs’), concluded between EU Member States, are incompatible with EU law insofar as they provide for arbitration between, on the one hand, an investor from one party and, on the other hand, the other party. In particular, intra-EU investor-State dispute settlement (‘ISDS’) was found to be incompatible with Articles 267 and 344 TFEU, as it was held to have ‘an adverse effect on the autonomy of EU law’ (para. 59).
In the aftermath of Achmea, in January 2019, the then 28 Member States issued three different declarations: first, by a majority of 22 Member States; second, by Finland, Luxembourg, Malta, Slovenia and Sweden; and, third, by Hungary. Inter alia, Member States disagreed as to whether Achmea also applies to the Energy Charter Treaty (‘ECT’). Unlike intra-EU BITs, the ECT is a multilateral investment treaty to which, at the time, both the EU and all but one EU Member States were parties.
In September 2021, the Court of Justice expanded the Achmea rationale to the ECT context in Moldova v Komstroy (Case C-741/19). Opinion 1/20, confirmed that the Court ‘has already ruled’ that the arbitration clause under Article 26 ECT is not applicable in an intra-EU context (para. 47). On 26 June 2024, the EU and 26 Member States signed a Declaration on the ‘legal consequences’ of Komstroy and ‘common understanding on the nonapplicability of Article 26 [ECT] as a basis for intra-EU arbitration proceedings’.
In light of the above, the Op-Ed will examine the Komstroy Declaration as the latest aspect of the EU’s strategy to eliminate intra-EU ISDS. First, it will discuss Komstroy, including how it has been received by arbitral tribunals and courts of third States. Second, it will explain how the Declaration, like its Achmea counterparts, aimed to translate Komstroy into terms which the international legal order can understand, as the judgment was exclusively grounded in EU law. Third, the Op-Ed will set out the limitations of this approach: the success of the EU’s position ultimately depends on whether the latter appears convincing from an international law perspective. Given the multilateral nature of the ECT, and the international law implications thereof, the effectiveness of the EU’s initiative seems uncertain.
Komstroy and international (investment) law
Komstroy, like Achmea, has had profound implications for the relationship between the EU law and the general international order. By invoking EU constitutional principles (primarily, concerning the autonomy of the EU
legal order), the Court rendered Member States’ prima facie obligations under international law incompatible with the EU treaties. Notwithstanding what one may think of Achmea and Komstroy as a matter of EU law, one notices that the Court of Justice did not explicitly recognise, much less address, their international law salience.
In Komstroy, the Paris cour d’appel asked the Court of Justice how the term ‘investment’ under the ECT should be interpreted. The dispute in the main proceedings concerned a dispute between a Ukrainian electricity distributor and Moldova. The dispute was originally settled by ISDS, according to Article 26 ECT, in accordance with standards of investment protection set out in the ECT and customary international law. The Paris-based arbitral tribunal awarded compensation to the claimant investor. The respondent State brought an action before the Paris courts asking for the annulment of the award.
Plainly, the above dispute was not intra-EU, but rather one between an investor from a third State and another third State. Crucially, the referred question – unlike Achmea – did not concern the compatibility of the ECT’s arbitration provision with EU law. Still, the Court found it ‘necessary’, in order to interpret the term ‘investment’, to first ‘specify which disputes between one Contracting Party and an investor of another Contracting Party concerning an investment made by the latter in the area of the former may be brought before an arbitral tribunal pursuant to Article 26 ECT’ (para. 40). This has given rise to criticisms that the Court’s findings on intra-EU ISDS in Komstroy are obiter dictum. Moreover, unlike Advocate General Szpunar, the Court did not engage with customary international law or the Vienna Convention on the Law of Treaties (‘VCLT’) when considering the application of Article 26 ECT as between EU Member States and the interpretation of a term of an international treaty.
This disconnect between EU law and general international law is evident in the stance of arbitral tribunals. With the sole exception of the Green Power v Spain award, arbitral tribunals have rejected the relevance of Komstroy, as they previously had questioned the applicability of Achmea to the ECT context. Courts of third states, seised in the course of annulment or enforcement proceedings, have similarly dismissed Komstroy as inapposite from the perspective of international law.
The Komstroy Declaration as a means of normative reconciliation
Given the above, the Komstroy Declaration set out the implications of the Komstroy judgment for international law. It thus constituted an effort to achieve, as a matter of international law, the termination of intra-EU ISDS under the ECT, as required by EU law.
In the Declaration, the EU and the governments of 26 Member States first ‘reaffirm[ed], for greater certainty’ that Article 26 ECT, which provides for investor-state arbitration, ‘cannot and never could serve as a legal basis for intra-EU arbitration proceedings’. This is ‘based on [certain] elements of Union law’, namely the Court’s interpretation in Komstroy and the primacy of EU law. Primacy was interestingly cast as a ‘rule of international law governing conflict of norms’.
Second, they reaffirmed that, as a result, Article 47(3) ECT ‘cannot extend, and could not have been extended, to such proceedings’. Article 47(3) ECT thus produces no legal effects ‘in intra-EU relations’. That article constitutes a so-called sunset clause whereby the ECT will continue to apply vis-à-vis an ECT contracting party for 20 years from that party’s withdrawal. The EU and many Member States (including France, Germany, Poland, Spain and the Netherlands) have withdrawn (or have notified their intention to withdraw) from the ECT in light of environmental concerns. In essence, the disapplication of the sunset clause sought to render their withdrawal from the ECT immediate.
Per the Declaration’s preamble, the EU and Member States had in mind ‘the rules of customary international law as codified in the [VCLT]’. They further reiterated that Komstroy, whose ‘legal consequences’ the Declaration affirmed, constituted an ‘authoritative interpretation’ of the ECT by parties of the latter, in line with international law.
The Komstroy Declaration signalled the conclusion of negotiations between the EU and Member States on a formal international agreement, which is expected to largely be similar to the Declaration text, and further provide for concluded and pending arbitral proceedings. That agreement is ‘now subject to internal procedures leading to its signature and entry into force’.
Lost in translation?
As set out above, the Declaration claims to set out an authoritative interpretation of the ECT under international law, but does not offer further justification.
Complications arise in this regard from the multilateral nature of the ECT. Following Achmea, EU Member States (with few exceptions) terminated intra-EU BITs, including their sunset clauses, via the conclusion of the plurilateral Termination Agreement. However, the EU and its Member States are not the only parties to the ECT, which, as of October 2024, has 50 parties, including countries like Japan, Kazakhstan, Switzerland, and Ukraine.
Customary international law requires that an authoritative interpretation within the meaning of Article 31(3)(a) VCLT is made jointly by all treaty parties. Komstroy can thus not be seen as such an authoritative interpretation, even though this is suggested in the Declaration’s preamble.
Rather, the Declaration would need to satisfy the conditions of Article 41 VCLT, governing the modification of multilateral treaties between certain of the parties only. Article 41(1)(b) VCLT requires that, given the ECT does not prohibit such modifications, the modification (i) ‘does not affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations’; and (ii) ‘does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole’.
It is beyond the scope of this Op-Ed to make the above assessment. It suffices to note that meeting the above conditions would be challenging in view of the object and purpose of the ECT, particularly in relation to the Article 47(3) ECT sunset clause. Given the stance of arbitral tribunals and courts of third States since Achmea
and Komstroy, set out earlier, they are likely to resist endorsing, via Article 41 VCLT, the Komstroy Declaration or, in due course, the negotiated international agreement.
Reservations under international law have also been expressed by Hungary, which made its own declaration, instead of joining the one by the EU and 26 Member States. While Hungary accepted Komstroy as a matter of EU law, it found that the ‘withdrawal of the applicability of Article 26(2)(c) [ECT] in intra-EU arbitration proceedings may be ensured in accordance with international law by a future amendment of the [ECT] through bilateral or multilateral treaty between all or certain parties to the treaty, in accordance with Article 40 or 41 [VCLT]’. It is recalled that the majority Declaration made no reference to specific VCLT articles or requirements under customary international law. Moreover, unlike the majority Declaration, Hungary’s Declaration did not consider that pending intra-EU arbitration proceedings under the ECT should be terminated; nor did it refer to Article 47(3) ECT. Hungary thus expressed a willingness to negotiate, on the basis of Komstroy, the termination of intra-EU ISDS under the ECT— but only prospectively. The Commission has initiated infringement proceedings against Hungary for ‘undermining the Union’s position’ on intra-EU arbitrations under the ECT and ‘contradicting’ Court’s case-law.
Concluding comments and looking ahead
The Declaration is a welcome recognition that further steps to reconcile the tension between EU law and international (investment) law are needed. Nevertheless, it is uncertain that the Declaration has pursued normative reconciliation effectively. The requirements stemming from the VCLT for the modification of a multilateral treaty between only certain parties are demanding. The EU’s response to Komstroy, particularly in relation to the ECT’s 20-year sunset clause, is inherently more complicated than its initiatives following Achmea, which strictly concerned bilateral intra-EU treaties.
Arbitral tribunals and courts of third States have generally demonstrated an unwillingness to substantially engage with arguments stemming from Achmea or Komstroy, even if cast in terms of international law. While such a stance can itself be criticised, this plainly demonstrates that the normative force of EU law is limited in the ISDS context. If only on such pragmatic grounds, the EU and willing Member States should re-engage with the modernised ECT, on which an agreement in principle was reached in June 2022. This would eliminate intra-EU ISDS and, ten years after its entry into force, protections of existing investments in fossil fuels. This may not be ideal given the unfolding climate crisis, which has contributed to internal dissensus on the ECT modernisation process. However, accepting this may be more prudent than risking arbitral tribunals upholding, in intra-EU disputes, the 20-year sunset period under Article 47(3) ECT vis-à-vis withdrawing parties, given the high threshold set by the law of treaties.
While the translation of Komstroy into international law may not be entirely literal in those circumstances, effort should be made to ensure that it is functionally intelligible to the international legal order.
Mark Konstantinidis is a PhD Candidate and Visiting Lecturer in Law at King’s College London. He is an EU qualified lawyer registered at the Athens Bar, Greece.
SUGGESTED CITATION: Konstantinidis, M.; “Translating Komstroy to international Law: Declaration on the legal Consequences of Komstroy”, EU Law Live, 09/10/2024, https://eulawlive.com/op-ed-translating-komstroy-to-international-law-declaration-on-the-legal-consequences-of-komstroy/
‘Treat me like a Stranger and that feels so rough’: The Commission may delay sufficient Motivation without incurring Liability (to protect the EU Budget?) (IMG v Commission, T-509/21 and T-381/15 RENV II)
Maria-Luisa Sánchez-Barrueco
The two judgments delivered by the General Court on 4 September 2024 aim to – but will not likely – close a judicial saga opposing an international organisation to the Commission, after the latter withdrew recognition of the applicant’s status in 2014. That decision stripped IMG of the opportunity to manage EU development cooperation funds thereafter, threatening its very survival. After several actions for annulment and non-contractual liability, and their respective appeals, the General Court acknowledges the Commission’s significant leeway to fix shortcomings of a procedural nature in its legal acts (here, lack of motivation) even after several years have passed, enabling the Commission to retroactively remove the illegality at the root of damages claims. The question arises whether that generous threshold is linked to the factual elements of the case, or whether it reflects that the protection of the financial interests has more weight than the right to good administration.
The factual and judicial elements in this saga
In 2013, the Commission adopted the annual development programme for Burma, endowed with EUR 10 million. The implementing decision entrusted an international organisation (International Management Group, IMG) with the management of those funds. This is a frequent practice in EU external relations, labelled ‘indirect management’ in the EU budgetary bible (the Financial Regulation). Before third parties lay their hands on EU funds, they must adhere to a ‘delegation agreement’ with the EU (currently ‘contribution agreement’). That agreement aims to ensure that the third party applies the key principles and management obligations in EU budget implementation, and that it grants access to the EU financial watchdogs for financial accountability purposes. IMG never got to sign the delegation agreement. An OLAF enquiry raised serious doubts about the regularity of IMG’s establishment as an international organisation. Headquartered in Serbia, IMG introduces itself as an international organization, although it does not result of a constitutive treaty (but is based on a Statute instead). Its website remains oddly silent on the identity of Member States.
The Commission immediately severed ties with IMG through a 2015 Decision where it provisionally suspended the signature of the Burma agreement and any future delegation agreement with IMG. Cut out from EU funds, IMG’s volume of activities dropped immediately. Indeed, the externalisation or outsourcing of external action funds by the Commission represents a lucrative business activity for third parties. Further to the coverage of direct costs (e.g., staff salaries and mission expenses, among many others), EU’s partners retain a lump sum as
‘compensation for indirect costs’, calculated as a fixed percentage of up to 7% programme expenditure, which is reimbursed without invoices or receipts. Excluded from that opportunity, IMG has relentlessly attempted judicial redress, through annulment and damages actions and their systematic appeals.
In 2017, the Court of Justice annulled the 2015 Commission Decision, finding that the Commission’s factual and legal arguments supporting the act were insufficient to meet the motivation threshold ( Joined cases C-183/17 and C-184/17 P). In that judgment, which otherwise reversed the Advocate General’s opinion, the Court of Justice stepped onto the scene and criticised, from an international law perspective, the virtual impact of the Commission’s analysis on IMG’s status. As I examined in a previous op-ed, further 2022 judgments (Joined cases C-619/20 P et C-620/20 P) bore witness to a bystander Court: it stood by – but did not supersede – the Commission as it assessed IMG’s status, on grounds of the separation of powers. Moreover, the Court of Justice then shifted the burden of the proof of status within the EU budgetary framework: subjects aspiring to become EU partners in budget management must offer undoubted proof of their status, rather than the Commission justify the lack thereof. The judicial interpretation of the Financial Regulation asserted, undoubtedly, that the Commission is under the obligation to carefully verify the eligibility of third parties (including international organisations) to manage EU funds, although the Court warned of the need to respect the procedural safeguards benefitting those subjects under the right to a good administration.
Between the 2017 and the 2022 judgments, the Commission adopted a final decision on IMG in 2021 which, on the basis of a 20-page explanatory annex, rejected IMG’s ‘international organization status’ with retroactive effect to 2014. The two judgments delivered on 4 September 2024 represent a new release in this judicial saga. By confirming the 2021 Commission Decision ( T-509/21), the General Court removes the illegality from the equation and renders IMG’s long-sought damages claim baseless ( T-381/15 RENV II).
Between
the separation of
powers and effective judicial protection
The annulment judgement ( T-509/21) offers a rich perspective on key matters and general principles but this oped only discusses the judicial reasoning on the obligation to motivate acts producing adverse effects on the legal position of individuals (here, the 2021 Commission Decision finally assessing that IMG is not an international organization for EU budgetary law purposes). The General Court redefines the boundaries of that obligation and, indirectly, the lengths to which it is willing to go in the judicial review of those acts.
The General Court first recalls that several factors shape the judicial review of the obligation to motivate legal acts. These elements are applied in an adaptive way, driven by teleological considerations rather than substantial or procedural ones. Provided that the (Commission’s) arguments do not open the door to contradiction, misunderstanding or gaps, the fact that they are not fully comprehensive would not compromise the legality of the act. Did the explanations offered place the addressee in the position to grasp the motives behind the act? That is arguably the sole question under review. Yet, that question allows the General Court to settle for merely summarising the arguments present in the Decision as to their clarity and quantity. The Court asserts the legality of the Decision after neither reviewing nor endorsing the quality of its motives in the light of EU or international
law. Such standard leaves indeed the principle of separation of powers untouched, but does it not lower the bar of effective judicial protection?
Retroactivity as a shield against liability?
Because the damages action ultimately hinged on the outcome of the annulment case, the General Court had not substantially addressed the Commission’s liability prior to Case T-381/15 RENV II. As we know, the right to compensation demands the presence of a real and actual (material or non-material) damage, which directly stems from an illegal behaviour attributable to the EU. In this ruling, the General Court concedes non-material damage in EU budget implementation, but accepts neither the causal link nor the illegality.
Although the Financial Regulation allows international organisations to participate in EU budget implementation within ‘indirect management’ that does not grant any claim to a specific subject to become an EU trustee, since the Commission enjoys a margin of discretion and may prioritise one organisation over another for reasons linked to economy, efficiency or effectiveness. The ground for liability in this case lies in the fact that the Commission withdrew a previous recognition of IMG as trustee without offering any legal analysis whatsoever on the meaning and scope of the concept of ‘international organization’ within EU budgetary law. The Court of Justice had already asserted that the serious breach of the obligation to motivate decisions within due diligence assessment, amounted to a breach of the fundamental right to good administration (Article 41 CFREU) thereby rendering the 2015 Decision illegal (C-184/17 P).
Eventually, however, the General Court interprets here that the Commission had rejected IMG for the wrong reasons, but that did not render the decision substantially wrong. Had the Commission conducted a substantially flawed analysis, redressing that illegality would imply acknowledging IMG as potential partner in budget implementation, thereby establishing a causal link with the proven material and non-material damage. Here, however, the causal link is rejected on grounds that the illegality conceded in appeal did not impact on the core decision. Granted, the Commission should have better justified its decision, but it was within its powers to exclude IMG from indirect management tasks anyway.
From a general perspective, this case illustrates the impact of the nature of the illegality on the applicants’ position in damages actions. They are placed on a significantly easier position when the illegal decision at stake stems from a substantially flawed assessment than when the root cause is a procedural flaw – here, insufficient motivation. In the latter case, applicants end up trapped in the impossibility to establish a sufficiently direct causal link. Within indirect EU budget management, the consistent refusal by the EU courts to supersede the Commission (in shaping the concept of ‘international organisation’ as potential partner within EU budgetary law) makes that obstacle impossible to overcome.
This conclusion is reinforced by the admission by the General Court that the Commission may retroactively right its wrong through a later decision. The applicant claims a loss of opportunity as a result of the provisional suspension of delegated agreements by the 2015 Commission Decision (later found illegal in C-184/17 P),
factually grounded on the reduction of its volume of operations to zero by 2018. However, the General Court finds that the final 2021 Commission Decision retroactively erases the damage, by providing well-grounded assessment that IMG had never been entitled to be accepted as signatory to delegation agreements with the Commission.
Is it possible to consider a 2021 Decision within the judicial assessment of damages allegedly caused in 2015? The principle of equality of arms arguably fills in the reasoning gap (para. 78): just as victims of damages may bring to the fore later events supporting the reality and actuality of the damage, the same chance may be offered to the defendant – the General Court argues – in order to contest that real and actual damage. In my view, however, just as no court would admit a victim’s own act enhancing the damage as evidence, no court should admit the defendant’s own act reducing the damage (by retroactively providing the justification missing in the original illegal act). Far from buttressing the equality of arms, the General Court allows the defendant to get away with damages by simply retroactively fixing them at a (much – six years) later stage. Without contesting the Commission’s views (IMG is in all likelihood a ‘garage international organisation’ that remains active for the sole purpose of collecting direct and indirect costs), I sense that a symbolic compensation for the loss of opportunity and the uncertainty suffered by IMG during six years would have aligned better with individuals’ right to effective judicial protection.
Maria-Luisa Sánchez-Barrueco lectures on EU law at the University of Deusto, where she holds a Jean-Monnet Chair on EU budgetary matters. She also collaborates with the BUDG-CONT committees of the European Parliament in research, and with the College of Europe in diplomatic training on EU external action.
Sánchez-Barrueco, M.L.; “‘Treat me like a Stranger and that feels so rough’: The Commission may delay sufficient Motivation without incurring Liability (to protect the EU Budget?) (IMG v Commission, T-509/21 and T-381/15 RENV II)”, EU Law Live, 10/10/2024, https://eulawlive.com/op-ed-treat-melike-a-stranger-and-that-feels-so-rough-the-commission-may-delay-sufficient-motivation-without-incurring-liability-to-protect-the-eu-budget-img-vcommi/
General Court upholds the restrictive Measures against Belarus’ State-owned Potash Producer
Celia Challet
On 18 September 2024, the General Court of the EU (the ‘General Court’) delivered its judgment in Belaruskali v. Council, ( T-258/22), in which it upheld the asset freeze targeting Belarus’ state-owned company enjoying a monopoly on the production of potash products. Belaruskali was listed on grounds of supporting and benefiting from Lukashenko’s regime, and of being responsible for the repression of civil society by dismissing employees who demonstrated after the 2020 elections.
This judgment offered an interesting perspective on sanctions. In addition to being brought by a major producer of potassium fertilizers worldwide, the action for annulment raised a diverse range of pleas which were representative of some of the main debates surrounding the current EU sanctions. Several pleas, in particular, led to a noteworthy answer by the General Court.
Firstly, the court confirmed the wide range of possible targets that can be listed under the criteria of ‘benefiting form of supporting Lukashenko’s regime’ or being ‘responsible for the repression’ in Belarus. The Council could lawfully consider that Belaruskali financially supported the regime through the payment of dividends. While this is not a new development in CJEU case law, the General Court insisted on the difference between taxes, which cannot be qualified as financial support to a State, and the compulsory payment of parts of the profits after the payment of taxes. By exercising a monopoly on the production of potassium fertilisers in Belarus as a state-owned enterprise, Belaruskali also fulfilled the criterion of benefiting from the Lukashenko regime. Lastly, the General Court confirmed that by intimidating and dismissing workers who took part in the strikes and peaceful protests after the 2020 elections, Belaruskali was ‘responsible for the repression of civil society’. One year after the General Court reached the same conclusion with respect to rectors who had expelled students for demonstrating (see cases T-581/21, T-582/21 and T-583/21), the Belaruskali judgment thus confirmed the resilience of the Council’s listings under the criterion of repressing the civil society.
Secondly, the General Court dismissed the applicant’s plea that the restrictive measures infringed international law and, notably, WTO rules. In line with its previous case law, the General Court ruled that the conditions for the GATT and the Trade Facilitation Agreement were not fulfilled, and that in any event Belarus was party to neither. Interestingly, Belaruskali also claimed that by depriving it of access to the Lithuanian port of Klaipėda to export its products, the Council had infringed the United Convention on the Law of the Sea. The General Court stressed that even though the Convention grants access to the sea to any country without a coastline, it does not guarantee access to a specific sea or port, in any situation. In addition, while the restriction on such right of access may be due to the sectoral restrictive measures against Belarus, it cannot be viewed as a consequence of the asset freeze targeting Belaruskali.
Thirdly, and perhaps more importantly, the General Court engaged at length with the applicant’s argument that the restrictive measures imposed against it infringed fundamental human rights, the principle that sanctions be targeted, and the principle of proportionality. Belaruskali claimed that its ability to trade ‘in a socially important commodity with humanitarian functions’ had been restricted, thereby threatening food security in a number of third countries. By affecting civilian populations, the measures had thus lost their targeted nature. In the light of the pre-existing CJEU case law on EU restrictive measures’ compliance with the principle of proportionality and the objective of adopting targeted measures, it is not entirely surprising that the General Court rejected the plea. However, the Court’s reasoning on the issue of food security reflects the sensitivity of the argument at hand. The Court recalled the objectives of democracy and human rights pursued by the sanctions under Article 21(2) (b) TEU. It insisted that the sectoral restrictive measures against Belarus (such as the import ban on Belarusian potash) were not at stake in the case. Belaruskali only challenged the freeze of its assets, which did not prohibit the export of Belarusian potash to third countries. In addition, the applicant’s evidence did not demonstrate that the global food crisis had been exacerbated by the asset freeze. Interestingly, the Court applied a similar reasoning to the sectoral measures, even though they were beyond the scope of the action for annulment. The General Court concluded its reasoning by ruling that in any event, no alternative measures were available to fulfil the objectives pursued by the sanctions against Belarus.
Celia Challet is Ph.D. candidate at Ghent University (Belgium) and research coordinator for the Multidisciplinary International Network on Sanctions.
Challet, C.; “General Court upholds the restrictive Measures against Belarus’ State-owned Potash Producer”, EU Law Live, 11/10/2024, https://eulawlive. com/analysis-general-court-upholds-the-restrictive-measures-against-belarus-state-owned-potash-producer/
SYMPOSIUM
SYMPOSIUM ON THE SELECTION OF EU JUDGES AND THE 255 COMMITTEE
The Role of the 255 Panel: some Observations
Allan Rosas
EU Law Live has organised a Symposium on the role of the so-called 255 panel. As is well known, this panel has been set up under Article 255 TFEU with a view to giving opinions on candidates’ suitability to perform the duties of Judge and Advocate-General at the Court of Justice and the General Court of the EU. As EU Law Live has invited me to contribute to the Symposium, allow me, in my capacity as President of the 255 panel, to make some observations on the role and practice of the panel.
Unlike some of the previous contributors to the Symposium, I cannot enter into a discussion about the content of any particular opinion the panel has given on the basis of Article 255 TFEU. According to the Council Decision relating to the operating rules of the panel (2010/124/EU), the deliberations of the panel ‘shall take place in camera’ (Rule 5), the hearing of the candidate ‘shall take place in private’ (Rule 7) and the panel’s opinion ‘shall be forwarded to the Representatives of the Governments of the Member States’ (Rule 8(2)). It has always been considered that the opinions are forwarded to the Representatives of the Governments of Member States only and that they remain confidential. This practice has also been condoned by the European Ombudsman (Decision 1955/2017/THH). Hence the following observations will be at a general level, focusing on the considerations the panel has long since used to perform the task entrusted to it under Article 255 TFEU. These considerations are explained in the activity reports of the panel (the most recent being the 7th report adopted on 25 February 2022), which are public and available on the panel’s website
It should be recalled that Articles 253 to 255 TFEU are very general in nature. If for instance the requirement, in Article 253, concerning the Court of Justice, of possessing ‘the qualifications required for appointment to the highest judicial office in their respective countries’ is understood to mean that all persons who hold such an office nationally automatically fulfil the requirements, one wonders why Article 255 was added to the Lisbon Treaty, entrusting the panel with the task of giving an opinion on candidates’ ‘suitability’ to perform the duties of members of the Union Courts. Moreover, such automaticity would imply that the requirements for becoming a Member of the Court of Justice would vary depending on the Member State.
The insertion of Article 255 TFEU in the Lisbon Treaty was considered a major achievement, designed, in the interest of the rule of law, including the requirement of judicial independence and impartiality, to enhance the likelihood that persons appointed to become members of the Union Court possess the necessary abilities and qualifications. In a judgment of 29 July 2024 (C-119/23, Valančius), the Court of Justice has observed, inter alia, that ‘the involvement of independent advisory bodies’ at national level may contribute to rendering the appointment process more objective (para. 56) while the verification of the ‘suitability’ of candidates proposed by the Member States is also the responsibility of the panel provided for in Article 255 TFEU (para. 58).
As the panel, already in 2010, that is, shortly after its creation, wished to provide a structure for its understanding of Articles 253 to 255 TFEU as well as to enhance transparency, it elaborated six considerations or criteria for assessing candidates’ suitability. To quote the 7th report of 2022, although the criteria established by the TFEU are exhaustive, ‘the panel nevertheless considers that they could be further clarified and specified’. A similar statement is already to be found in the first report of 2011. The six considerations as formulated in the 7th report are ‘the candidates’ legal capabilities’, ‘their professional experience’, ‘their ability to perform the duties of a judge’, ‘their language skills’, ‘their ability to work as part of a team in an international environment’ and ‘whether their independence, impartiality, probity and integrity are beyond doubt’. These considerations have since the early days of the panel’s work been constantly applied by the panel and explained in several activity reports.
As to the criterion of a certain length of high-level professional experience, in particular, it is based on the idea that considerable and high-level professional experience is valuable for the functions of a judge at the highest level. Similar considerations exist also for other types of functions, and at national judicial level as well. As explained in the panel’s activity reports, the requirement of 20 years of high-level duties, for the Court of Justice, and twelve or even fifteen years of experience of the same nature, for the General Court, is a ‘presumption’ which ‘can, however, be overridden where candidates demonstrate exceptional legal capabilities’. There are many cases where, despite the fact that the consideration of 20 years of high-level professional experience was not fulfilled, the opinion on a candidate was nevertheless positive.
Some of the scholars contributing to this Symposium seem to call into question an essential ingredient of the panel’s practice so far, considering that the nature of the considerations applied by the panel, and its practice of applying them, would favour the creation of some sort of ‘EU judicial bureaucracy’. It needs to be repeated, the application of the panel’s considerations is not recent but dates back to the early days of the panel’s existence. The idea was to render some structure and transparency for the way the panel should assess the suitability of candidates.
It should be added that the proportion of negative opinions has been quite constant over the years (this is not an objective but an empirical statement), ranging from roughly 20 to 25 % of the opinions concerning a first term of office. Moreover, as the panel has stated in its activity reports, it does not give preference to any particular professional path nor any one field of legal competence more than another. Even a cursory look at the current members of the Union Courts (who in most cases have been appointed for their first term on the basis of a favourable opinion of the panel), or indeed the members of the panel itself, will display a wide variety of legal and professional backgrounds. It is not the intention of the panel to create an ‘EU judicial bureaucracy’, whatever is meant by this expression.
In my humble opinion, and that of my colleagues on the panel, reducing the role of the panel to a simple check whether the requirements contained in Article 253 TFEU are fulfilled would amount to turning the clock back from one of the achievements of the Lisbon Treaty. The rule of law, I am afraid, would not be served.
Allan Rosas Dr.Jur., Dr.Jur. h.c., Dr.Pol.Sc. h.c., is Professor Emeritus and Visiting Professor at the College of Europe (Bruges), the Global School of Law (Católica University, Lisbon) and the University of Helsinki. He is President of the Article 255 TFEU panel and of the Independent Ethical Committee of the European Commission. He was Judge at the European Court of Justice from January 2002 to October 2019.
SUGGESTED CITATION: Rosas, A.; “The Role of the 255 Panel: some Observations”, EU Law Live, 07/10/2024, https://eulawlive.com/op-ed-therole-of-the-255-panel-some-observations/
SYMPOSIUM
SYMPOSIUM ON THE APPLE STATE AID CASE (C‑465/20 P)
The poisoned Apple: is the Court of Justice seeking Justice through legal Misinterpretation?
Romero J.S. Tavares
The recent final ruling on the Apple State-Aid case surprised many commentators, including this author, who trusted the Court of Justice of the European Union (‘the Court’) would be a competent technical interpreter of international tax law. The proper interpretation of Articles 7 and 9 of the OECD Model Convention (‘MC’) is what must underlie the proper understanding of these infamous cases where the EU Commission found Member States granted illegal state aid primarily via an alleged misapplication of transfer pricing rules in convoluted international structures involving U.S. multinationals. Trust in the technical competence of the Court means trust in the rule of law within Europe, in the quality of EU institutions that ought to reflect the low sovereign-political risk implied in the assurance of fundamental freedoms inherent to the functioning of the internal EU market.
If the final decision of the Court of Justice reflects legal misinterpretation, whether purposeful, in a quest for broader justice under tax or competition laws, or whether accidental, as a showing of the technical inability of the Court to address and interpret very complex transfer pricing notions, both, that would signal an incremental degree of political (sovereign) risk in Europe. And in that sense, increased political risk signals not only a potential increase to the cost of capital for Europe, but, most worryingly, a potential erosion of the quality of EU legal institutions and of the rule of law within Europe.
In the Amazon, Starbucks and Apple cases, as this author has demonstrated in 2016, the main tax effect of the intricate legal structures that were put in place was the deferral of residual U.S. taxation on profits that, under the arm’s length principle (ALP) as interpreted by OECD Transfer Pricing Guidelines, and the Authorized OECD Approach (AOA) for the Attribution of Profits to Permanent Establishments (APPE), were not and should not be attributable to any other country. Prior to the U.S. Tax Reform of 2017 (Tax Cut and Jobs Act (TCJA)), that is, prior to the U.S. reduction of its federal corporate tax rate from 35% to 21%, and prior to the U.S. adoption of its own version of an ‘innovation box’ (Foreign Derived Intangibles Income or FDII) at par with multiple EU regimes, U.S. multinationals that did not adopt complex international structures seeking deferral of the residual U.S. tax burden would be under a competitive disadvantage vis-à-vis their non-US competitors which operated at lower corporate tax rates (and/or benefiting from incentives that are more potent than those explicitly available under U.S. law) and under participation exemption (rather than deferral) regimes.
On the other hand, the structures implemented by U.S. multinationals were so efficient in preventing the triggers of U.S. taxes on residual profits whilst not attributing incremental profits to market countries (for instance, here and here), that such structures could hypothetically have been perceived as distortionary from a competition law or international trade law perspective (perhaps or allegedly income tax subsidies favoring U.S. exports), albeit
never materialising any state-aid granted by any non-U.S. jurisdiction. Perhaps U.S. transfer pricing rules and jurisprudence, by not incorporating the AOA/APPE among other features of the OECD Guidelines, would be viewed as too laxed or too formalistic; or perhaps U.S. controlled foreign company (CFC) and entity classification (‘check-the-box’) rules would have too many loopholes. Perhaps not.
Tackling that hypothetical distortion and seeking competitive or trade justice may have been a motivator for the Court of Justice to find against Ireland and Apple. However, the route of illegal state-aid findings is grounded on an apparent misinterpretation of transfer pricing rules which may itself be a poisoned tree – from which the Euro 13 billion (plus) fruits might also be poisoned, infecting the European Internal Market via increased political risk.
Crucially, the lingering mistake and misinterpretation that started with the EU Commission, that was momentarily corrected by the General Court, and that ultimately tainted the Court of Justice’s final decision concerns a gross misunderstanding of the facts underlying the Cost Sharing Agreement (CSA) between the non-resident Irish entities (that have Irish branches) and Apple, Inc., and the relevance of those facts in the interpretation of Articles 7 and 9 of the OECD MC, in the application of the ALP and AOA/APPE. The Court of Justice recites
‘ The Commission recognises in its decision that key functions in relation to the Apple Group’s IP were performed by Apple Inc., either as parent company of the Apple Group or under the cost-sharing agreement, but it explains that that is not relevant for the purposes of the allocation of ASI’s and AOE’s profits among their respective head offices and branches, and relevant only in the light of the reference framework applicable (recitals 308 to 318 of that decision)’ (para. 90).
And it summarises the General Court finding, noting that:
‘More specifically, the Court held: that, in finding that the Apple Group’s IP licences had to be allocated to the branches by default because ASI and AOE had neither employees nor any physical presence outside the Irish branches, the Commission had allocated profits using an ‘exclusion’ approach, that it had not correctly assessed the activities of those companies in Ireland and that it had based its reasoning on an incorrect assessment of normal taxation under Irish law (paragraphs 166 to 249 of the judgment under appeal); that ASI’s and AOE’s branches in Ireland did not control the Apple Group’s IP licences and did not generate the profits which the Commission claimed they achieved (paragraphs 251 to 295 of the judgment under appeal); and that the agreements and activities of ASI and AOE outside Ireland showed that those companies were in a position to develop and manage the Apple Group’s IP and to generate profits outside Ireland and that those profits were, consequently, not subject to tax in Ireland (paragraphs 296 to 311 of the judgment under appeal)’ (para. 92).
Furthermore, the CJEU recalls that
‘ (…) the Court made detailed factual findings, in paragraphs 251 to 310 of the judgment under appeal, about the branches and ASI’s and AOE’s decision-making in the United States and found that the Commission’s claims about the actual activities of the Irish branches and the head offices of those companies were inaccurate’ (para. 100).
However, the Court of Justice delved into a procedural argument and technicality to sustain that the additional evidence concerning Apple Inc.’s functions and activities performed within the U.S. and affecting the intangibles licensed to the Irish non-resident entities was inadmissible in the proceeding (Apple judgment at pars. 142, 146, 147, 180-182, 186, 234, 257) and, embarking in the same (very material) factual and legal error incurred by the EU Commission in its arguments (Apple judgment at pars. 159, 185, 220-222, 235, 236, 254-256, 258), to rule that the U.S. functions and activities were irrelevant for the case. Note, that evidence was supplementary, and thus presented in addition to and reaffirming the CSA itself.
From a transfer pricing perspective, under Articles 7 and 9 of the OECD MC, and in conformity with the OECD Guidelines and AOA/APPE, the CSA should serve to evidence that U.S. employees located in Cupertino performed significant people functions (SPFs) and managed economically significant risks pertaining to the operation of the Apple global value chain (including its global outsourcing of hardware manufacturing to Foxconn) which yields residual profits that should not be attributable to the Irish branches, as it should serve to demonstrate that U.S. employees managed all critical functions, activities and risks pertaining to the intangibles that benefit the entire group and each entity in the value-chain, including those intangibles licensed to the Irish non-resident entities and not managed or controlled by their (taxable) Irish branches which merely performed routine functions. By excluding (or not properly regarding) the functions and activities performed by Apple Inc. through its U.S.-based employees from the transfer pricing analysis, especially where a CSA involving Apple Ind and the Irish entities is in place and in evidence, and therefore by ignoring the Apple value chain within which the Irish entities and branches are inserted, the Court of Justice made a grave error in its interpretation of Articles 7 and 9 of the OECD MC, without which no illegal state aid could have been found as being granted by Ireland.
Oddly, the rulings on Amazon and Starbucks were contrary to the EU Commission, and as such were not surprising at all. What might have been so different about the Apple case, that would have prompted the Court of Justice to embark on what should be perceived as a misinterpretation of the ALP as per the OECD Guidelines and the AOA/APPE?
Is it because it is Apple, the Apple fact pattern and structure? Is it because of Apple’s perceived monopolistic profile (perhaps enabled by the U.S. tax system) and unique combination of hardware sales to consumers and digital services revenues? Is it there where the Court of Justice is drawing the line on what it perceives as unlawful international tax competition or avoidance fueled by the U.S. tax system and perpetrated by U.S. multinationals? Or is it because it is Ireland, and its overall attraction of Foreign Direct Investment (FDI), international trade, foreign reserves, and economic growth, allegedly through tax competition within the EU? Most likely, it is both, Apple and Ireland, while the EU Commission and the Court would have jurisdiction over ‘Ireland, the enabler’. If any of this is hinted in the Court’s ruling, then the State aid rules may not have been the most adequate and legitimate approach to pursue justice under EU competition laws or international trade law. If none of it is there, the only hypothesis left would be the simple misunderstanding of the intricacies of transfer pricing norms. Either way, this judgment is not a testament to the quality of institutions and of the rule of law within Europe.
Any shortcomings, digressions and leaps of thought inevitably present in this Op-Ed remain the responsibility of the author. Note that the viewpoints in this article are not necessarily the viewpoint of the author’s firm.
Romero J.S. Tavares, PhD (Wirtschaftsuniversität Wien) is a Partner at an international Firm and a Professor of International Tax Law.
SUGGESTED CITATION: Tavares, R.; “The poisoned Apple: is the Court of Justice seeking Justice through legal Misinterpretation?”, EU Law Live, 07/10/2024, https://eulawlive.com/op-ed-the-poisoned-apple-is-the-court-of-justice-seeking-justice-through-legal-misinterpretation/
The Apple Case: ‘Wrong’ Questions, misguided Answers, regulatory Distortion?
Scott Wilkie
The Apple Decision Simpliciter – A Blinkered Approach?
There is an adage: ‘You get answers to the questions you ask’. If the questions miss the mark, the ensuing analysis and resulting answers are likely to be misguided.
The Court of Justice’s Apple decision follows this unfortunate course. The result, abetted by the Court’s narrow construction of the affected events as exclusively European, is the antithesis of the objectives of both ‘State aid’ regulation according to Article107(1) of the Treaty on the Functioning of the European Union (TFEU), and tax law’s transfer pricing notions that exist to discipline where multinational enterprises (MNEs) should account for their income in spite of their and their transactions’ legal formalities. The Court adopted transfer pricing analytics to measure the impugned ‘State aid’ as Irish tax Apple’s two non-resident Irish subsidiaries should have paid on income attributed by the Court in default of anywhere else to their Irish operations. Allowing a transfer pricing mindset to control what is fundamentally a trade and competition analysis has unfortunate trade and competition law and tax law implications.
The Court proceeded on the basis that the incomes in question, particularly associated with the exploitation of Appe’s valuable intellectual property, arose only in the ‘closed system’ comprising the two Irish subsidiaries and Ireland. Accordingly, that income had to be, indeed could only be, accounted for only by them as they were legally constituted, within the parameters of European regulation. Justified by a strangely parochial and indeed perverse perception of transfer pricing’s arm’s length standard, which exists to correct distortions of the allocation MNEs’ international income using legal constructions of various kinds, the Court of Justice proceeded to orchestrate and validate just such a distortion of Apple’s international income and consequently interested countries’ taxing rights. The Court decided that the target income could only have arisen, that is, been earned in Ireland, the only place where observable activities of those subsidiaries took place. Ireland must have ‘aided’ Apple by not levying tax on these incomes.
What Is ‘Wrong’ With the Court of Justice’s Analysis?
The Court of Justice’s configuration of the case reflects a failure to understand that tax is only ever an enabler of a country’s distinctive self-interested fiscal policy sensitive as it may be to equally distinctive and self-interest but likely different fiscal policy of other countries. Tax does not exist in a silo for its own sake. The Court concluded that there was impermissible ‘aid’ without seizing critically on an invitation offered by the General
Court to consider whether the United States, not Ireland, provided it. The Court applied transfer pricing’s arm’s length standard and, though disputed but in my view correct to say, its consonant manifestation in the OECD’s Authorised OECD Approach to allocate profits to permanent establishments (PE), i.e., source country business presences, without considering critically why these tax notions exist. Relying on a correspondingly faulty ‘functional analysis’ of where property and people engaged in the business of the Irish subsidiaries were observed (and consequently effectively it was presumed intangible property originated and its value was monetised), the income of the subsidiaries could only have been taxable by Ireland. Ireland’s decision not to tax that income, which the Irish tax authorities considered to arise elsewhere, constituted impermissible ‘aid’ in the amount of the tax not collected – this even though, as Ireland effectively asserted, without an entitlement to collect the tax under applicable law properly applied according to well-established international conventions for taxing MNE income, it could hardly be said that Ireland spent it, i.e., gave it up to favour Apple or Ireland’s own global competitive interests.
Regrettably, the tax law and lore animating the Court’s analysis, namely transfer pricing’s seemingly limitless search for ‘value creation’ within an MNE, is opaque, essentially without enforceable standards and malleable by taxpayers and countries ‘competing’ to identify and justify where tax is or is not due. The ‘standards’ are as much impressionistic as objectively analytical or legal despite transfer pricing’s contrary pretension captured by voluminous methodology in the OECD’s Transfer Pricing Guidelines to overcome the legal fragmentation by MNEs of their economic unities, as also, more recently, the OECD’s Pillar One and Two initiatives also seek to do.
It is titillating, perhaps, to cast MNEs as presumptive threats to vulnerable fiscs. But MNEs are not the real focus; simply, they are the media by which countries engage with each other via their taxpayers, almost like silent partners, in a world that understandably resists the lure of, though may be prepared to politely discuss, universal standards and rules. A penetrating and coherent tax and trade analysis of countries’ interactions with each other in their own interests requires more than a preoccupation with allegedly colourable corporate tax planning.
The fundamental questions for which the Apple decision provides no satisfactory insight or regulatory guidance are: Who’s fiscal and tax policy funded the ‘aid’, and accordingly what is the proper interest of European regulators and the Court of Justice?
How would an analysis of Apple’s relevant circumstances proceed free of substantively unsound implicit assumptions that the context was exclusively European and the affected manifestations of Apple’s business only the two Irish subsidiaries? Ask and answer these questions: Was there public intervention, i.e., an expenditure of public resources, in Apple’s favour? If so, why, that is, as a gratuity or to serve a public objective?
Knowledgeable tax analysts sensitive to the strictures of trade law would realize that the ‘aid’ or more broadly ‘subsidy’ here arose from how, quite deliberately in its own interest, the United States taxed international business income of its MNEs and income of non-resident enterprises (including foreign subsidiaries of its MNEs) from conducting US business. The tax ultimately payable on US MNEs’ foreign business income could be deferred
indefinitely, and non-residents’ business income had to be connected in specific ways to a US taxable presence. Changes in US and Irish tax law were meant to deter the kind of tax planning Apple employed; Pillar Two is similarly but more broadly directed.
Why might the US (and other countries) adopt this course? The reasons are not hard to understand by stepping back from the didactic kind of analysis pursued by the Court of Justice to explain an outcome almost foreordained by the Court’s perception of the case. Is it in US’s interest that its taxpayers pay foreign tax when the US effectively pays that tax via a reduction in the US tax base through foreign tax credit? Is it the interest of the US to invest in its economic development to fulfil its fiscal choices by enlisting the efforts and expertise of its taxpayers, by providing interest-free financing of indefinite duration, i.e., deferred tax? Taking the General Court’s cue, the Court of Justice should have considered more carefully where the impugned ‘aid’ arose and asked why the US’s ‘subsidy’ of its MNEs in the US’s national interest is a proper object of European regulation and adjudication even if the Court might have found the planning colourable. It might have recognised that the World Trade Organisation (WTO) exists for trade related controversies even if engendered by direct taxation notably when non-EU axes of interest, i.e., third countries to the EU, are involved. An adverse view on the WTO’s effectiveness is not a reason or an excuse to absorb its jurisdiction.
What Is Really at Stake – And Why Does It Matter?
Why and to what extent should countries judge and control each other’s fiscal policy enabled by their tax systems? Countries are different, economically, socially, culturally, and using a transactional metaphor in relation to their needs and opportunities pursued in relation to each other (Wilkie, Pillar 2 – ‘What’s It All About?’, Tax Notes International, 2023). Adjusting the parameters of taxation is just one of various interchangeable and economically equivalent ways to fund public consumption and direct economic development. Why should countries’ fiscal decisions be expected to be the same, let alone controlled by the expectations and circumstances of others? Why should the effectiveness and independence of fiscal choices depend on the modality of their delivery, by tax systems or otherwise? In the Apple situation, would the Court of Justice have been able to exercise judicial oversight if the US had taxed the Apple subsidiaries’ incomes but outside the tax system provided financial assistance in other ways to cultivate national wealth creation through its MNE proxies, not unlike what could happen by recycling Pillar Two-inspired minimum taxes with similar financial effects to reduced taxation? Is that a useful question to ask as a kind of ‘sanity check’ on an otherwise untempered exercise of regulatory and judicial intervention that has the effect of appropriating elements of another country’s fiscal policy?
Yes, excesses arising from corporate tax planning – really, from the strategic design and reach of countries’ tax systems - are possible. It is reasonable to be concerned about, but not reasonable to presume, countries deliberate ‘beggaring’ each other through so-called ‘tax competition’. Professor Wolfgang Schön’s examinations of the relationships between taxation and democracy (Schön, Taxation and Democracy, 2019) and between tax scholarship and activism (Schön, International Tax Scholarship and International Tax Activism, 2024) are instructive. However, we still live in a heterogeneous legal and tax world despite the effects of ‘globalisation’. Same-ness of regulatory
objects and methods is not to be expected even as an aspirational ideal; possibly the most to be hoped for are shared ‘best practices’ countries should be expected to consider as they pursue their own interests, realizing that like situations of others may be important to the achievement of their own interests. What one country may perceive as illegitimate tax avoidance may fairly be seen by another as the extrapolation of benign fiscal and concomitant tax policy. Who is to say which perception should dominate and even so how it would be administrable and enforceable?
The Apple decision should inspire more attention to the implications sovereignty and democratic decision making in the context of international trade, not as platitudes but as practical drivers of business, trade, and legitimate and effective regulation. Professor Dani Rodrik’s ‘trilemma of globalization’ (Rodrik, The Globalization Paradox, 2011) highlights the trade-offs among sovereignty, democracy, and global trade, only two of which at any time are, according to Rodrik, possible. The notions addressed by Rodrik, Schön, and Wilkie (noted earlier in relation to Pillar Two), which are undercurrents in the Apple decision, are not merely theoretical.
Perhaps unwittingly, in Apple the Court of Justice essentially rendered a political judgment by (mis)using tools with more limited and nuanced features that the Court notices. The result is a distortion of the connotation of ‘state aid’ according to the TFEU and a perverse misapplication of international guidance and law on international income allocation of MNEs which fails to recognise the real ‘home’, the US, of the disputed income even though for its own reasons the US may have chosen not to tax it or, twisting the tax kaleidoscope only slightly the US systemically taxed and rebated simultaneously.
Yes, indeed: ‘You get answers to the questions you ask’.
Scott Wilkie is a Research Fellow of the Amsterdam Centre for Transfer Pricing and Income Allocation, part of the Amsterdam Center for Tax Law of the University of Amsterdam, a recently retired Distinguished Professor of Practice at Osgoode Hall Law School, York University, and a retired partner of and senior counsel to Blake, Cassels & Graydon LLP. Widely published, he speaks and writes broadly about taxation, notably international taxation and tax policy. He is a former vice-chair of the Permanent Scientific Committee of the International Fiscal Association, served as president of the Canadian branch of the International Fiscal Association, and is a past chair of the Canadian Tax Foundation.
SUGGESTED CITATION: Wilkie, S.; “`Wrong´ Questions, misguided Answers, regulatory Distortion?”, EU Law Live, 08/10/2024, https://eulawlive. com/op-ed-wrong-questions-misguided-answers-regulatory-distortion/
THE LONG READ
Moribunds Live Longer: 30 Years of the European Economic Area1
Carl Baudenbacher 2
I. Introduction
The European Economic Area (EEA) Agreement entered into force on 1 January 1994 after protracted negotiations and a difficult birth.3 The plan to create an EEA Court consisting of Judges from the Court of Justice of the European Union (CJEU) and from the European Free Trade Association (EFTA) States was rejected by the CJEU in Opinion 1/91.4 Switzerland was not in a position to ratify the agreement after a negative referendum. The people of Liechtenstein voted in favour of the treaty, but since the Principality wanted to maintain its customs union with Switzerland, it postponed ratification.
As a result, although all the seven EFTA States had signed the EEA Agreement, the EFTA pillar consisted of only five states when the Treaty came into force: Austria, Finland, Iceland, Norway and Sweden. Accordingly, the EFTA Surveillance Authority (‘ESA’) and the EFTA Court each had five members.
After the prolonged birth, the EEA also had a troubled youth. On 1 January 1995, Austria, Finland and Sweden joined the EU. Only Iceland and Norway remained members of the EFTA pillar. For a while it even looked as if Norway would also join the EU. Rumour has it that the EU would have continued the EEA Agreement with Iceland as the only member state of the EFTA pillar. The Icelander Thór Vilhjálmsson would have acted as a single judge of the EFTA Court. And since there was a direct flight Keflavík-Luxembourg at the time, he could have been able to live in Iceland.
After a second favourable referendum, Liechtenstein joined the EEA in the EFTA pillar and the number of ESA and EFTA Court members rose again to three.
The first ESA President Knut Almestad hit the nail on the head during the inauguration of the EFTA Court on 4 January 1994 when he remarked that the establishment of independent institutions in the EFTA pillar, namely the ESA and the EFTA Court, is the quintessence of the EEA Agreement.5
1. Icelandic Lawyers Associatoin, Reykjavík, 12 September 2024.
2. Prof. Dr. iur. Dr. rer. pol. Carl Baudenbacher is Partner at an international Law firm based in Zurich/Oslo/Stavanger/ Brussels. Visiting Professor London School of Economics. President of the EFTA Court 2003-2017.
3. C. Baudenbacher, Judicial Independence. Memoirs of a European Judge, Springer 2019.
4. Opinion of the Court of Justice of 14 December 1991, Opinion 1/91, EU:C:1991:490.
5. Report of the EFTA Court 1 January 1994- 30 June 1995.
Former Minister of Justice of Iceland Björn Bjarnason has rightly stated that no binding decisions can be taken in the EFTA pillar without direct involvement of representatives of the three EEA/EFTA States in the ESA and the EFTA Court.6
Former ESA President Sven Svedman has aptly written that with three members each, the ESA and the EFTA Court are not weak, but vulnerable.7
II. An example of judicialisation of international law
The Free Trade Agreements which were concluded between the EEC and the individual EFTA States in 1972/1973 did not provide for a common court of the contracting parties. Conflicts had to be sorted out by diplomatic means. The EEA Agreement has replaced diplomatic conflict resolution by an international or supranational court. This is referred to as judicialisation of international law.8 Judicialisation has a global and a regional dimension. At the global level, it has led to the establishment of the International Court of Justice, the WTO Appellate Body and the International Criminal Court. At the regional level, the CJEU and the European Court of Human Rights (‘ECtHR’) have played a leading role. The Andean Court of Justice, the African courts, the EFTA Court and the Court of the Eurasian Economic Union have been established under the influence of these two European institutions. The EFTA Court is therefore an important example of the judicialisation of international law. However, it is a special case due to its ties to the jurisprudence of the CJEU. According to Article 6 EEA and Article 3(2) Surveillance and Court Agreement (‘SCA’), the EFTA Court shall follow or take into due account relevant ECJ case law. Nevertheless, the homogeneity principle is not a one-way street. Firstly, the EFTA Court often has to answer legal questions that have not yet been put to the CJEU in this form. And secondly, adjudication is not an exact science. The EFTA Court has therefore also gone its own way on important issues where CJEU case law was available. This has not harmed the homogeneity of single market law nor the good functioning of the EEA single market, on the contrary.
III. Surveillance
As far as surveillance by the ESA is concerned, I will limit myself to three remarks:
(1) There is an unjustifiable Norwegian dominance of the surveillance authority. With the exception of a short period when the Icelander Hannes Hafstein was president, the presidency has always been in Norwegian hands.
(2) As Norway is the superpayer, it is able to control, to a considerable extent, the level of surveillance it wants to be subject to. Insofar it is also the superplayer.
6. B. Bjarnason, ‘Iceland and the EEA - í norskri skýrslu’, 16 April 2024.
7. S. E. Svedman, ‘Prosperity in the EEA’, in C. Baudenbacher (ed.), The Fundamental Principles of EEA Law, Springer, 2017.
8. C. Baudenbacher, ‘Justizialisierung des Rechts: Kann das Europäische Modell in andere Teile der Welt exportiert werden?’ StudZR 3/2005.
(3) Over the course of time, there were huge differences in terms of the quality between individual ESA Colleges, abrupt changes in composition, and even sometimes the rather unfortunate return of College Members to government services after their tenure in Brussels. Having said that, I should emphasise that the current College functions well and that the Icelander Árni Páll Árnason has an excellent reputation.
IV. Judicial control
The EFTA Court is the small sister court of the Court of Justice of the EU (CJEU). The CJEU has been influenced by French legal thinking. This goes, in particular, for the cabinet system, the French working language, the style of the judgments, the office of the Advocate General (‘AG’), and the secrecy of the vote, which means that no dissenting opinions are allowed.
The CJEU has for its part had an impact on the EFTA Court, but only to a certain extent: there are the cabinet system and the prohibition to dissent, but the working language is English and there is no AG. That has consequences for the judicial style: the small EFTA Court cannot allow itself to decree, it must give broad reasons.
As far as methods of interpretation are concerned, teleology, homogeneity and reciprocity are decisive. Teleological interpretation is purposive interpretation. The law in both EEA pillars shall develop in a homogeneous way so that a level playing field for economic operators is guaranteed. Reciprocity means that EU operators must, in principle, enjoy the same rights in the EFTA pillar as EFTA operators enjoy in the EU pillar. Occasionally, the CJEU understands teleology as requesting a dynamic approach. In important cases, the EFTA Court has followed suit.
V. The case-law of the EFTA Court
1. Constitutional principles
Virtually all cases in which the EFTA Court was required to clarify constitutional issues were brought by Icelandic judges. This shows that Icelandic judges are rather independent minds.
In Einarsson (E-1/01), the EFTA Court ruled against the direct effect of norms of the EEA Main Agreement.9 InSveinbjörnsdóttir (E-9/97), it recognised EEA state liability,10 and in Karlsson (E-4/01), it defended state liability against an attack by the Norwegian state.11 InKolbeinsson (E-2/10), the EFTA Court indicated that EEA law may provide a basis for State liability for incorrect application of EEA law by national courts.12
9. Judgment of the EFTA Court of 22 February 2002, E-1/01
10. Advisory Opinion of the EFTA Court of 10 December 1998, E-9/97
11. Judgment of the EFTA Court of 30 May 2002, E-4/01
12. Judgment of the EFTA Court of 10 December 2010, E-2/10.
2. Other landmark cases
There have been other landmark cases concerning Iceland:
- In E-18/11 Irish Bank, 13 the relationship EFTA Court – national courts of last resort was called ‘more partner-like’ than the relationship CJEU – national courts of last resort in the EU. ‘At the same time, courts against whose decisions there is no judicial remedy under national law will take due account of the fact that they are bound to fulfil their duty of loyalty under Article 3 EEA.’ EFTA citizens and economic operators benefit from the obligation of EU Member States courts of last resort to make a reference to the ECJ (reciprocity).
- E-7/13 Creditinfo Lánstraust14 concerned charges for the re-use of public sector information under the respective Directive. The EFTA Court referred to LBJ’s 1966 US Freedom of Information Act that granted American citizens the right to see the contents of files maintained on them by federal agencies.
- E-15/12 Wahl elaborated on the grounds for refusing entry to Norway to a Norwegian member of the Hells Angels organisation who has no criminal record, under the EU Citizenship Directive 2004/38/EC.15
- In E-18/14 Wow Air,16 the President allowed the application of an accelerated preliminary reference procedure in a case on the allocation of slots at Keflavík International Airport in view of the ‘economic sensitivity of the case’. On the merits, the Court opened the system of grandfather rights, which favoured the established air carriers to competition to a certain extent.
- E-29/15 Sorpa17 dealt with the question whether a municipal waste management body was capable of committing an abuse of a dominant position. The judgment was referenced by the Stockholm City Court/ Market and Patent Court
- In E-16/11 Icesave, 18 the EFTA Court held that Iceland was not liable for deposits in failed banks, provided the state had established a deposit insurance scheme in accordance with EEA Law. In other words, there was no obligation to use taxpayer funds to recapitalise the Icelandic deposit insurance scheme which was overwhelmed by the collapse of the banking system in October 2008 as a consequence of the financial crisis. As far as the law was concerned, the EFTA Court found that there was no legal basis for the liability of the State. The Court added that, from an economic point of view, ‘moral hazard’ was to be avoided. It was the first time, a European court cited economic literature.
Other landmark cases originating mostly (but not always) from Norway include the following:
13. Judgment of the EFTA Court of 28 September 2012, E-18/11
14. Judgment of the EFTA Court of 16 December 2013, E-7/13.
15. Judgment of the EFTA Court of 22 July 2013, E-15/12
16. Judgment of the EFTA Court of 10 December 2014; Order of the President of 30 September 2014, E-18/14
17. Judgment of the EFTA Court of 22 September 2016, E-29/15
18. Judgment of the EFTA Court of 28 January 2013, E-16/11.
- In E-3/00 Kelloggs, 19 the EFTA Court acknowledged the precautionary principle in food law as the first court in the EEA. The CJEU followed suit in the Danish vitamins case.20
- In E-1/06 Gaming Machines, E-3/06 Ladbrokes, and E-8/23 Trannel, 21 the EFTA Court dealt with the Norwegian gambling monopolies. Norway is the last state in the EEA that has such a monopoly. The Norwegian courts have not correctly implemented the EFTA Court’s rulings.
- In E-2/06 Norwegian Waterfalls, 22 the EFTA Court held that the ‘hjemfall system’ was unlawful. Licences of unlimited duration for acquiring property rights to waterfalls could only be issued to Norwegian public undertakings, in all other cases the property rights reverted to the State after a certain period of time.
- In E-5/10 Dr Kottke, 23 Liechtenstein law provided that persons without residence in Liechtenstein who acted as plaintiffs or appellants were, on an application by the defendant or respondent, obliged to provide the latter with security for costs unless international treaties stated otherwise. The EFTA Court held that such a discriminatory provision could be justified on the basis of public interest objectives provided it was necessary and not excessive in attaining legitimate objectives. With this, the EFTA Court went against ESA and the Commission who had both argued that the national rule in question was, as a matter of principle, incompatible with the fundamental freedoms.
- In E-15/10 Norway Post, 24 the EFTA Court ruled that the ESA cannot be granted a margin of discretion regarding complex economic appraisals and competition law decisions which impose fines must be subject to full judicial review.
- In E-14/11 DB Schenker I, 25 a case on access to documents, the EFTA Court in essence found that a private plaintiff may act as a ‘private attorney general’ in the interest of the common good (see also E-11/23 Låssenterent26).
- In E-3/13 and E-20/13 Olsen, 27 the Court recognised the right of establishment of a trust. Subsequent taxation cases were on the same line.
- In E-14/15 Holship, 28 the EFTA Court found that a dockers monopoly to load and unload vessels was incompatible with EEA competition law and with the freedom of establishment.
- E-5/16 Vigeland dealt with the question of whether works whose copyright had expired could be protected under trademark law.29
19. Judgment of the EFTA Court of 5 April 2002, E-3/00
20. Judgment of the Court of Justice of 23 September 2003, Commission v Denmark, C-192/01, EU:C:2003:492.
21. Judgments of the EFTA Court of 14 March 2007, E-1/06 ; of 30 May 2007 E-3/06, and of 13 May 2024, E-8/23.
22. Judgment of the EFTA Court of 26 June 2007, E-2/06
23. Judgment of the EFTA Court of 17 December 2010, E-5/10
24. Judgment of the EFTA Court of 18 April 2012, E-15/10
25. Judgment of the EFTA Court of 21 December 2012, E-14/11.
26. Judgment of the EFTA Court of 9 August 2024, E-11/23
27. Judgment of the EFTA Court of 9 July 2014, E-3/13 and E-20/13
28. Judgment of the EFTA Court of 19 April 2016, E-14/15
29. Judgment of the EFTA Court of 6 April 2017, E-5/16.
VI. EFTA Court as a European dialogue partner
1. The EFTA Court and the CJEU
First, the EFTA Court regularly refers to the case law of the Court of Justice, the General Court, and the opinions of Advocates General. In view of the homogeneity rules laid down in the EEA Agreement and in the SCA, this goes without saying. But homogeneity is no one way street.
Second, EU Courts and Advocates General also refer to the EFTA Court. During the period between 1994 and 2017, some 200 EFTA Court judgments were rendered in contested cases, that led to 238 references by the CJEU, AGs and the GC in 151 cases.
EU courts have not referred to EFTA Court case law delivered since 2018, while AG’s have referred five times. On 31 July 2024, the Irish High Court referred to an EFTA Court ruling.
The willingness of the EU judiciary to engage in dialogue is firstly linked to the quality of the EFTA Court’s case law.30 Secondly, the actors in the EU pillar will pay attention that the judges of the EFTA Court are completely independent. Thirdly, as a much smaller player, the EFTA Court must be proactive. It must not forget that it is on foreign soil in Luxembourg. It is not enough for the judges of the EFTA Court to see themselves as emissaries of their states and, in case of doubt, to look to their capital city. They must have the will and the ambition to help shape the development of EU law and bring specific EFTA values to bear. This also requires regular scholarly publications and speaking engagements at major events in the EU.
2. The EFTA Court and the ECtHR
First, the EFTA Court refers to ECtHR. Examples of references by the EFTA Court to the case law of the ECtHR include the following: In E-8/97 TV 1000, 31 a case related to the broadcasting of hard-core pornographic movies from Sweden to Norway under the TV Directive 89/552/EEC, reference was made to ECtHR Handyside.32
In TV 1000, the Icelander Thór Vilhjálmsson was Judge Rapporteur. At the same time, he was Vice-President of the ECtHR, something that wouldn’t be possible anymore today. The Strasbourg Court was a part-time institution until 1998.
Thanks to the Icelandic Bacalhau case E-2/03 Ásgeirsson33, I am one of the few continental Europeans who knows how cod is processed. The EFTA Court held that defrosting, heading, filleting, boning, trimming, salting and
30. C. Baudenbacher, ‘A new structure for the EFTA Court?’, Rett24.
31. Judgment of the ECtHR of 7 December 1976, Application no. 5493/72
32. Advisory Opinion of the EFTA Court of 12 June 1998, E-8/97
33. Judgment of the EFTA Court of 12 December 2003, E-2/03.
packing fish that has been imported frozen whole to Iceland from countries outside the EEA does not constitute sufficient working and processing within the meaning of the relevant rules for the product to be considered of Icelandic origin. Fish remains fish. Reference was made to ECtHR Pafitis on the question whether the delay resulting from a reference to the EFTA Court leads to a violation of the right to a fair trial within a reasonable time as guaranteed by Article 6 ECHR.34
In E-14/15 Holship, 35 reference was made on the negative right to freedom of association to ECtHR Sørensen and Rasmussen (52562/99 and 52620/99).36
Second, the ECtHR also refers to the EFTA Court.
The ruling of the ECtHR in Ališić (60642/08, 2014) referred to the case E-16/11 Icesave 37 The Slovenian Government had invoked that judgment, but the ECtHR found that it was of little relevance to the case.
Much more important are the references to E-21/16 Pascal Nobile in ECtHR Ástráðsson v. Iceland (26374/189)38 on the independence and impartiality of courts, on irregular appointments of judges and thus on the lawful composition of a court of law.
Excursion: In E-10/14 Deveci, 39 the EFTA Court held that the EU Charter of Fundamental Rights (in casu: Article 16 on the freedom to conduct a business) may be relevant for the interpretation of EEA law.
Third, two ECtHR judgments concern EFTA Court rulings
The cases ECtHR 47341/15 Konkurrenten40 and E-1/17 Konkurrenten41 concerned an application against the EFTA Court’s dismissal of its complaints against State aid decisions taken by the EFTA Surveillance Authority. The ECtHR dismissed the application.
The ruling of the ECtHR 45487/17 Norwegian Federation of Trade Unions42 concerned an application against the judgment of the Supreme Court of Norway that was based on the EFTA Court ruling in E-14/15 Holship 43
34. Judgment of the ECtHR of 26 February 1998, Application no. 20323/92.
35. Judgement of the EFTA Court of 19 April 2016, E-14/15
36. Advisory Opinion of the EFTA Court of 12 June 1998, E-8/97.
37. Judgement of the ECtHR of 11 January 2006, 52562/99 and 52620/99
38. Judgement of the ECtHR of 1 December 2020, 26374/189
39. Judgement of the EFTA court of 18 December 2014, E-10/14
40. Judgement of the ECtHR of 5 November 2019, 47341/15.
41. Judgement of the EFTA court of 25 January 2017, E-1/17
42. Judgement of the ECtHR of 10 June 2021, 45487/17
43. Judgement of the EFTA court of 19 April 2016, E-14/15
The ECtHR dismissed an application by Norway’s dockworkers union against Norway whose Supreme Court had found that the dockworkers’ monopoly in a Norwegian port to run counter to the right to freedom of establishment and the competition rules of the EEA Agreement.
In Konkurrenten, the ECtHR’s Second Section stated that the basis for the presumption established by Bosphorus was in principle lacking when it comes to the implementation of EEA law at domestic level. In Bosphorus, the Grand Chamber held that if an organisation to which a Contracting State has transferred jurisdiction is considered to protect fundamental rights in a manner at least ‘equivalent to the ECHR, it is presumed that said State has not departed from the Convention’s requirements when it merely implements legal obligations flowing from its membership in the organisation.44
In Konkurrenten, the Second Section found that in contrast to EU law, direct effect and primacy were lacking within the framework of the EEA Agreement, and the EEA Agreement did not include the EU Charter of Fundamental Rights or any reference to other legal instruments having the same effect, such as the Convention. The Bosphorus presumption did therefore not apply.
In Holship, the ECtHR’s Fifth Section departed from this case law by finding that fundamental rights form part of the unwritten principles of EEA law. Thus, the absence of a codified fundamental rights instrument in the EEA Agreement was irrelevant to deciding whether the Bosphorus case law applied to the implementation of the EEA Agreement.
VII. Recalcitrant Norway
1. Nominating judges who are close to the Government
Norway has from the outset tried to install a judge on the EFTA Court who would look to Oslo in case of doubt. Bjørn Haug was the Norwegian State Attorney himself; Per Tresselt was a career diplomat who came to the Court from his position as ambassador to the Russian Federation; Per Christiansen was a high civil servant. When he was to be renewed, the Norwegian administration caused a mess. He was finally prolonged by 3 years instead of 6. This decision was unlawful and had to be repealed. When it came to Per Christiansen’s succession in 2023, Norway was unable to timely nominate a judge.
2. Drying out the EFTA Court
The Norwegian State Attorney pursued from the outset a strategy of keeping as many cases as possible out of the EFTA Court. Hoyesterett (the Supreme Court of Norway) for its part exercised a 12-year reference boycott against the EFTA Court. It was only lifted after a joint seminar of the two courts in Oslo in 2014.
44. Judgment of the ECtHR of 30 June 2005, Bosphorus Hava Yolları Turizm ve Ticaret Anonim Şirketi v. Ireland, application no. 45036/98, paragraphs 152 et seq. and 155 et seq.
3. «Room for Manoeuvre» replaces loyalty
Enforcement of the law in the EFTA pillar is to a greater extent in the hands of national courts than in the EU pillar. Professor Christian Franklin of the University of Bergen has therefore rightly stated that the principle of loyalty that is enshrined in Article 3 EEA is even more important in the EEA law context than in the EU law context.45 Knut Almestad also deserves approval for his statement that, ‘good faith is the keystone which supports the EEA edifice, without which the construction might crumble’46.
In the practice of the Norwegian State Attorney, this obligation was, however, replaced by an opaque dogma of ‘room for manoeuvre’ for the Norwegian state.47 In my view, this dogma is unlawful because it breaches the principles of loyalty, reciprocity and homogeneity. It favours the state whereas the legitimate interests of the market actors – producers, workers, consumers, dealers, investors – are disregarded.
As regards the preliminary reference procedure, the State Attorney applies four strategies48: (1) He tells Norwegian courts to refrain from making a reference to the EFTA Court. (2) He argues that the concept of a court or tribunal authorised to make referrals should be interpreted narrowly. (3) If the Norwegian State loses before the EFTA Court, he may tell the Norwegian court not to follow the judgment. (4) If a subsequent parallel case is brought before the CJEU, the State Attorney may participate and ask the CJEU to create a judicial conflict with the EFTA Court.
The most serious example of the latter strategy was the case I.N./Ruska Federacija 49 I.N., a Russian citizen had fled to Iceland and, after having gone through the usual procedures, obtained Icelandic citizenship. When he wanted to go on holiday to the Adriatic Sea, I.N. was arrested by the Croatian police based on a Red Notice of Interpol Moscow. The Croatian Supreme Court referred questions to the CJEU, and the Norwegian State Attorney participated in the proceedings. The State Attorney wanted the CJEU to create a judicial conflict with an EFTA Court judgment it disliked and contended, inter alia:
- that the duty of loyalty in EEA law goes less far than in EU law; - that Icelanders enjoy less protection against extradition to Russia than EU citizens.
45.Art. 3 EEA, Principle of loyalty, in Arnesen/Fredriksen/Graver/Mestad/Vedder, Agreement on the European Economic Area. A Commentary, 2018.
46. The Essentials, in: EFTA Court, Ed., The EEA and the EFTA Court: Decentered Integration, Hart, Oxford/Portland Oregon 2015, 299
47. C. Baudenbacher, ‘ The Norwegian Concept of «Room for Manoeuvre»: A Nail in the EEA’s Coffin» in Heidemann, M., (ed.) The Transformation of Private Law –Principles of Contract and Tort as European and International Law. A liber Amicorun for Mads Andenas, Springer, 2024, pp. 125–148.
48. See, e.g., Carl Baudenbacher/Laura Melusine Baudenbacher/Mads Andenas, Comparative Law Considerations on the Norwegian Wealth Tax, forthcoming.
49. Judgment of the Court of Justice of the EU of 2 April 2020, C-897/19 PPU, EU:C:2020:262.
University of Bergen Professor Halvard Haukeland Fredriksen called these arguments put forward by the Norwegian State in the case ‘so weak that it is difficult to understand how they came to be presented to the CJEU’ and criticised ‘the view of the Norwegian government was that the EEA Agreement should be interpreted as not offering an Icelandic (or Norwegian!) citizen the same protection against extradition to Russia as that which EU law offers EU citizens’. (Emphasis added.)50
Advocate General Tanchev rejected the State Attorney’s contentions. The Grand Chamber of the Court followed the Advocate General without even mentioning the State Attorney’s submissions.
4. Judicial revisionism
On 31 October 2017, the EFTA Court, consisting of myself as President and Judge Rapporteur, the Norwegian Judge Per Christiansen and the Icelandic ad hoc Judge Benedikt Bogason (at the time a Justice of the Supreme Court of Iceland, today the President of that Supreme Court) ruled in E-16/16 Fosen-Linjen that a simple breach of European public procurement law may in itself be sufficient to trigger the damages liability of a contracting authority.51
After my resignation from the Court, two Norwegian professors, in interaction with the State Attorney, instigated the Supreme Court of Norway to refer the case for a second time. Ad hoc Judge Bogason wouldn’t sit anymore because the regular Icelandic Judge Páll Hreinsson had recovered from an illness. On 1 January 2018, Hreinsson became President of the EFTA Court. On 1 August 2019, the newly composed EFTA Court overruled the first Fosen judgment holding that European law does not require that any breach of the rules on public procurement is in itself sufficient to award damages for the loss of profit to persons harmed by an infringement (E-7/18).
VIII. Excursus: The Swiss conundrum
In 1992, the EEA was undermined by the Swiss Foreign Ministry (‘MFA’) which wanted the country to join the EU. It urged the Government to lodge an application for EU membership six months before the referendum. After the negative vote, Switzerland was able to conclude two packages of essentially institution-free bilateral agreements with the EU. The Government had pledged that Switzerland would join the EU in the near future. When it became clear that EU membership was out of question, the European Commission demanded that Switzerland accept institutions. From 2008 onwards, the Commission proposed ‘EEA II’ or ‘Docking’ to the ESA and the EFTA Court. Docking would have meant that Switzerland could have maintained its sectoral approach, but would have subject its bilateral agreements with the EU to the jurisdiction of the EFTA Court (with a College Member at the ESA and a Judge at the Court).
50. Halvard Haukeland Fredriksen, ‘A “special relationship” built on a patchwork – How the CJEU sees the EEA EFTA States’, EFTAStudies.org
51. Judgment of the EFTA court of 31 October 2017, E-16/16.
However, the MFA opted for the CJEU, the court of the other side, which by definition lacks neutrality, not in an infringement procedure, but a dispute settlement procedure. EEA membership and ‘docking’ were dropped. In 2018, the mechanism which has been laid down in the association agreements with former Soviet Republics was politically accepted by the Government. According to this, conflicts between Switzerland and the EU shall be decided by a pro-forma arbitral tribunal, which, however, must request a binding ruling from the CJEU when EU law or Treaty law with the same content as EU law is at issue.
Since spring of this year, Switzerland is officially negotiating with the EU on the conclusion of a framework agreement. The mechanism with the pro-forma arbitration tribunal in front and the CJEU behind the curtain is, however, no more part of the talks. Switzerland has accepted it without any negotiation.52 The Government doesn’t admit it, but in truth it aims at setting a point of no return on the road to EU membership.
IX. Future of the EEA
The Icelandic attempt to join the EU failed. The attempt to bring the UK to EEA/EFTA failed. The Swiss attempt to go for the model with the pro-forma arbitration will (hopefully) fail. What will happen then, is open. It looks as if the EEA Agreement will for the foreseeable future continue to exist with the three current EFTA States.
The ESA’s problems are its size, the Norwegian dominance and the lack of transparency of the appointment process for the College Members. General principles of EEA law are not enforced to a sufficient extent by the ESA.
The EFTA Court’s main problem is the lack of a panel that would scrutinise the quality and independence of candidates that have been nominated by the Governments. Nevertheless, a few years ago, the ESA rejected a complaint concerning the absence of an independent assessment panel in the EFTA pillar of the European Economic Area similar to the panel established under Article 255 TFEU on flimsy grounds.
I have always said that the judges of the smallest court in the world must have four P’s: they must have prestige and power, show presence and master the protocol. According to the protocol, they are on an equal footing with their colleagues at the large EU Court of Justice. But the protocol must be filled with life.
It seems that judicialisation is reaching its limits at the global level. The United States plays a prominent role in this. The WTO Appellate Body doesn’t function anymore. For a number of years, the US has been blocking candidates. The term of the last sitting AB member ended on 30 November 2020.
The ICJ has been in difficulties for quite some time. In response to rulings by the Court, the US refused to participate in the proceedings in the main action brought by Nicaragua in 1984 and withdrew from the Court’s compulsory jurisdiction in 1986.
52. For the text of the common understanding see here.
More than 120 states recognise the International Criminal Court, but not China, Israel, Russia and the USA. US soldiers and former US President George W. Bush therefore do not have to answer for any crimes committed in the Iraq war. The ICC has lost reputation as a consequence of the announcement of its prosecutor, Karim Khan, to seek an arrest warrant for Israeli Prime Minister Benjamin Netanyahu and other members of his cabinet on charges of war crimes and crimes against humanity as part of the ICC investigation in Palestine in May 2024.
At the European level, judicialisation is also criticised. Brexit was not least a consequence of the dynamic interpretation of EU law by the CJEU. But in the remaining 27 EU member states, the authority of the CJEU is largely undisputed. The ECtHR is in a more delicate situation. In the UK, calls for withdrawal have been heard for a long time. The Swiss parliament and government have opposed the recent Klimaseniorinnen judgment (53600/20)53 as being ultra vires.
The EFTA Court has never been called into question in Iceland and Liechtenstein. In Norway, however, it has met considerable resistance in government circles. In recent years, this resistance has diminished mainly because the EFTA Court has issued some decidedly pro-government rulings.
Overall, the EEA Agreement has functioned surprisingly well in the first 30 years of its existence. It is doubtful whether the composition of the EFTA pillar will change in the foreseeable future. The French saying ‘c’est le provisoire qui dure’ appears to prove true in the case of the EEA.
53. Judgment of 9 April 2024, 53600/20.
HIGHLIGHT F THE WEEK S O
Action against Commission’s measures relating to the renewal of approval of the active substance glyphosate, published in OJ
Monday 7 October
Official publication was made of an action, brought on 1 August 2024, by Collectif des maires anti-pesticides and Others against the European Commission, seeking the annulment of Commission Implementing Regulation (EU) 2023/2660 of 28 November 2023 renewing the approval of the active substance glyphosate: T-399/24.
Read on EU Law Live
Court of Justice validates Dutch tax law on cross-border loan interest deductions
Monday 7 October
On October 4, 2024, the Court of Justice delivered its judgment in Staatssecretaris van Financiën (Intérêts relatifs à un emprunt intragroupe) (C-585/22), in which X BV challenged a Dutch tax regulation that restricted interest deductions on cross-border intra-group loans, claiming it was incompatible with the EU’s freedom of establishment under Article 49 TFEU.
Read on EU Law Live
Court of Justice to hear appeal case on ECB’s measures concerning irrevocable payment commitments relating to deposit guarantee schemes or resolution funds
Monday 7 October
An appeal, brought on 13 August 2024, by Confédération nationale du Crédit mutuel and Others against the judgment of the General Court in Confédération nationale du Crédit mutuel and Others v ECB (T-189/22), claiming that the Court of Justice should set aside the judgment under appeal, thereby partially annulling ECB Decisions, was officially published in the OJ: C-552/24 P.
Read on EU Law Live
Cham Wings Airlines from Syria challenges EU sanctions in legal action
Monday 7 October
Official publication was made of Cham Wings Airlines v Council (T-415/24), a case concerning an action against two Council measuresl: Decision (CFSP) 2024/1510 and Implementing Regulation (EU) 2024/1517, both comprising restrictive measures imposed in response to the ongoing situation in Syria.
Read on EU Law Live
Judicial Organisations appeal dismissal of legal challenge against Poland’s Recovery Plan, published in OJ
Monday 7 October
A group of judicial organisations, including Magistrats européens pour la démocratie et les libertés (Medel), the International Association of Judges, and others, lodged an appeal against an order from the General Court that dismissed their legal challenge concerning the Council of the European Union’s approval of Poland’s Recovery and Resilience Facility (RRF) plan.
Read on EU Law Live
Court of Justice upholds most fines imposed on undertakings participating in cartel for concrete reinforcing bars
Monday 7 October
On 4 October, the Court of Justice delivered its judgment in an appeal case concerning, in essence, the annulment of a Commission’s decision imposing a fine on five undertakings for partaking in an anti-competitive agreement on the Italian market for concrete reinforcing bars: Ferriera Valsabbia and Valsabbia Investimenti v Commission and Alfa Acciai v Commission (C-29/23 P and C-30/23 P).
Read on EU Law Live
SBK Art Limited Liability Company Seeks Clarification on EU Fund Freezing Regulations
Monday 7 October
Official publication was made of the Hoge Raad der Nederlanden’s (Netherlands Supreme Court) request for a preliminary ruling to the Court of Justice of the European Union regarding SBK Art Limited Liability Company and its interaction with regulations governing frozen assets.
Read on EU Law Live
Court of Justice dismisses thyssenkrupp’s appeal against Commission’s decision on joint control of a joint venture
Monday 7 October
The First Chamber of the Court of Justice rendered its judgment in a case on appeal concerning the appellant’s claim that the Court should annul the Commission’s decision C (2019) 4228 final of 11 June 2019 in case M.8713 – Tata Steel/ thyssenkrupp/JV: thyssenkrupp v Commission (C-581/22 P).
Read on EU Law Live
New judges and Advocates General appointed to Court of Justice and General Court
Tuesday 8 October
Following the renewed terms of five judges in the Court of Justice, on 8 November 2023, the EU made several judicial appointments and other renewals within its Court of Justice and General Court.
Read on EU Law Live
ESAs’ Joint Committee publishes its key priorities for 2025
Tuesday 8 October
Following the publishing of the European Banking Authority’s (EBA) and European Securities Market Authority’s (ESMA) respective Work Programmes for 2025, on the 1st and 2nd of October, the Joint Committee of the European Supervisory Authorities (ESAs) published its own Work Programme for 2025.
Read on EU Law Live
Decision of the Authority for European Political Parties and European Political Foundations to register European Left Alliance for the People and the Planet as a European political party, published in OJ
Tuesday 8 October
On September 27, 2024, the Authority for European Political Parties and European Political Foundations approved the registration of the European Left Alliance for the People and the Planet as a European political party.
Read on EU Law Live
Court of Justice to hear case concerning an environmental permit granted for the reconversion of a laundry site
Tuesday 8 October
Official publication was made yesterday of a request for a preliminary ruling from the Raad van State (Belgium), lodged on 29 March 2024, in Provincie Oost-Vlaanderen, Sogent, a case concerning the submission by an autonomous municipal corporation of an application to the authorities of the city of Ghent for an environmental permit for the reconversion of a laundry site: Case C-236/24.
Read on EU Law Live
Council adopts Listing Act to enhance EU public capital markets
Tuesday 8 October
The Council of the EU adopted the Listing Act, a legislative package designed to make EU public capital markets more attractive and accessible for companies, particularly small and medium-sized enterprises (SMEs).
Read on EU Law Live
EU establishes new sanctions framework against Russia’s destabilising activities
Tuesday 8 October
On October 8, 2024, the Council of the EU introduced a new sanctions framework targeting individuals and entities involved in Russia’s destabilising actions abroad.
Read on EU Law Live
Antigua and Barbuda removed from EU List of non-cooperative tax jurisdictions
Tuesday 8 October
The Council of the EU removed Antigua and Barbuda from its list of non-cooperative jurisdictions for tax purposes, which is part of the EU’s external strategy on taxation, aimed at promoting global tax governance.
Read on EU Law Live
Council publishes conclusions on climate finance ahead of COP 29 climate conference
Tuesday 8 October
The Council adopted its conclusions on climate finance, ahead of the UN framework convention on climate change (UNFCCC), highlighting the EU’s commitment to mobilise climate finance.
Read on EU Law Live
Koen Lenaerts and Thomas von Danwitz confirmed as President and Vice-President of the Court of Justice of the EU
Tuesday 8 October
The President and Vice-President of the Court of Justice of the EU were confirmed, following the partial renewal of the membership of the Court of Justice.
Read on EU Law Live
Presidents of Chambers of five judges and First Advocate General officially elected at the Court of Justice
Tuesday 8 October
Ensuing the partial renewal of the Court of Justice, the Presidents of the Chambers of five judges, as well as the First Advocate General, were elected at the Court of Justice.
Read on EU Law Live
Council Regulation (EU) 2024/2642 of 8 October 2024 concerning restrictive measures in view of Russia’s destabilising activities, published in OJ
Wednesday 9 October
Official publication was made of Council Regulation (EU) 2024/2642 of 8 October 2024 on sanctions imposed on Russia for its destabilising activities.
Read on EU Law Live
Updated Recommendations to national courts concerning the initiation of preliminary ruling proceedings, published in OJ
Wednesday 9 October
Official publication was made of the Recommendations to national courts and tribunals regarding the initiation of preliminary ruling proceedings, following the most recent amendment of Protocol No. 3 on the Statute of the Court of Justice of the European Union.
Read on EU Law Live
Registration of Europe of Sovereign Nations as a European political party, officially published
Wednesday 9 October
The Decision of the Authority for European Political Parties and European Political Foundations registering Europe of Sovereign Nations as a European political party was officially published in the OJ.
Read on EU Law Live
Interpretative guidelines on the application of the exemptions referred to in Article 5 of ReFuelEU Aviation, published in OJ
Wednesday 9 October
The European Commission issued interpretative guidelines (C/2024/5997) to clarify exemptions under Article 5 of Regulation (EU) 2023/2405, which aims to align EU air transport with the Union’s climate targets for 2030 and 2050.
Read on EU Law Live
EBA issues Guidelines on redemption plans under Markets in Crypto-Assets Regulation (MiCAR) for token issuers
Thursday 10 October
The European Banking Authority (EBA) published final Guidelines concerning the orderly redemption of token holders in cases where issuers face crises.
Read on EU Law Live
European Court of Auditors raises concerns over rising irregularities in 2023 budget
Thursday 10 October
The European Court of Auditors’ annual report reveals a concerning rise in irregular spending within the EU budget, with an estimated error rate reaching 5.6% in 2023.
Read on EU Law Live
EDPB adopts Opinion on data processors, Guidelines on legitimate interest, Statement on rules for GDPR enforcement and work programme 2024-2025
Thursday 10 October
During its latest plenary, the European Data Protection Board (EDPB) adopted an Opinion on certain obligations following from the reliance on processor(s) and sub-processor(s), Guidelines on legitimate interest, a Statement laying down additional procedural rules for GDPR enforcement and the EDPB work programme 2024-2025.
Read on EU Law Live
Transfer of preliminary ruling jurisdiction to the General Court
Thursday 10 October
Following the partial transfer of jurisdiction from the Court of Justice of the European Union (CJEU) to the General Court, the latter has established a specialised chamber to handle cases regarding certain preliminary ruling requests, from October 2024 to August 2025, until the next triennial renewal of the Court’s officials.
Read on EU Law Live
Council adopts new designs protection package
Thursday 10 October
The Council adopted the revised Directive on the legal protection of designs and the amended Regulation on community designs, both constituting the design package.
Read on EU Law Live
Council adopts new cybersecurity rules for digital products
Friday 11 October
The Council adopted its new cyber resilience act, thus establishing novel requirements for digital products, with the aim of ensuring that such products are safe before they are placed on the market.
Read on EU Law Live
New product liability rules better suited for an increasingly digital and circular economy, approved by Council
Friday 11 October
The Council adopted a Directive updating the EU’s civil liability rules, to better take into account the digital features that many many products nowadays have, and the increasingly circular economic business models.
Read on EU Law Live
Election of new Presidents of Chambers at the General Court of the European Union
Friday 11 October
Following the appointment of Mr. Dean Spielmann and Mr. Fredrik Schalin to the Court of Justice, the General Court of the European Union elected Mr. Roberto Mastroianni and Ms. Petra Škvařilová-Pelzl as Presidents of Chambers, with their term running from 9 October 2024 to 31 August 2025.
Read on EU Law Live
Commission notice of initiation of anti-dumping proceedings against Chinese imports of hardwood plywood, published in OJ
Friday 11 October
The European Commission’s Notice of initiation of anti-dumping proceedings on imports of hardwood plywood originating in the People’s Republic of China was officially published in the OJ.
Read on EU Law Live