Freezing of funds – Annulment by the General Court

Judgment

T-579/11

12.02.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Application for annulment

Tarif Akhras

v.

Council of the European Union

General Court

7th Ch.

I. Ulloa Rubio

/

Common foreign and security policy

Key-words

Common foreign and security policy — Freezing of funds — Rights of the defence — Obligation to state reasons — Manifest error of assessment — Right to life — Right to property — Right to respect for private life — Proportionality               

Significant points

  1. With regard to the specific context of the inclusion of the applicant’s name in the lists annexed to the contested acts preceding 23 March 2012, the Council relied on the following two reasons: ‘Founder of the Akhras Group (commodities, trading, processing and logistics), Homs’ and ‘Provides economic support for the Syrian regime’.

With regard to the first reason, it must be stated that it merely describes the applicant’s status. The fact that he is the founder of an industrial group does not necessarily or automatically mean that the applicant satisfies the general criteria set out in paragraph 67 above. Therefore, the statement that the applicant is the founder of a Syrian industrial group cannot constitute a fact capable of being stated as an adequate and specific reason for the contested acts preceding 23 March 2012.

With regard to the second reason, it must be held that, in the present case, the Council merely reproduced one of the criteria that would justify including the applicant’s name in the lists at issue, that is to say, the criterion relating to support for the incumbent regime, as introduced by Decision 2011/522 (see paragraph 5 above). The mere reproduction of the criterion, without any other information to support it, cannot serve as a sufficient statement of reasons on the part of the Council.

  1. It is therefore necessary to uphold the third plea in law and to annul the contested acts preceding 23 March 2012 for a failure to state reasons in so far as those acts concern the applicant.

Noteworthy

Once again, the General Court has annulled in part a decision of freezing of funds for failure to state reasons.

VAT fraud – principles of effectiveness and equivalence

Judgment

C-662/13

12.02.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Reference for a preliminary ruling

Surgicare — Unidades de Saúde SA

v.

Fazenda Pública

CJEU

9th Ch.

K. Jürimäe

P. Mengozzi

VAT

Key-words

VAT — Directive 2006/112/EC — Deduction of input tax — Transactions constituting an abusive practice — National tax law — Special national procedure where the existence of abusive practices is suspected in the field of taxation — Principles of effectiveness and equivalence.

Significant points

In the absence of any EU rules in the area, the means of preventing VAT fraud falls within the internal legal order of the Member States under the principle of procedural autonomy of the latter. In that regard, it is apparent from the Court’s settled case-law that it is for the domestic legal system of each Member State, in particular, to designate the authorities responsible for combatting VAT fraud and to lay down detailed procedural rules for safeguarding rights which individuals derive from EU law, provided that such rules are not less favourable than those governing similar domestic actions (principle of equivalence) and that they do not render impossible in practice or excessively difficult the exercise of rights conferred by the EU legal order (principle of effectiveness).

  1. As regards, first, the principle of effectiveness, it must be held that the special procedure laid down by Article 63 of the CPPT, subject to a limitation period of three years, is characterised by a preliminary hearing within 30 days for the taxpayer concerned, the submission by the taxpayer of all the evidence that he considers to be relevant and the obtaining of an authorisation from the head of the department, or the official to whom he has delegated the relevant power, responsible for the application of anti-abuse rules. Furthermore, in accordance with that provision, reasons must be given for the decision adopted. It follows from those elements that the national procedure in question is favourable to the person suspected of having committed an abuse of rights, inasmuch as it seeks to guarantee the observance of certain fundamental rights, in particular the right to be heard.
  2. As regards, second, the principle of equivalence, it cannot be excluded that, for the same reason, compliance with the principle of equivalence requires the application of the special procedure when a taxpayer is suspected of VAT fraud.

Consequently, Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that it does not preclude the mandatory preliminary application of a national administrative procedure, such as that laid down by Article 63 of the Code of Taxation Procedure and Proceedings (Código de Procedimento e de Processo Tributário), in the event that the revenue authorities suspect the existence of an abusive practice.

Noteworthy

Excise duties – Concept of “formalities connected with the crossing of frontiers”

Judgment

C-349/13

12.02.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Reference for a preliminary ruling

Minister Finansów

v.

Oil Trading Poland sp. Z.o.o

CJEU

10th Ch.

M.C. Vajda

N.Jääskinen

Tax

Key-words

Excise duties — Directives 92/12/EEC and 2008/118/EC — Scope — Mineral oils and energy products — Lubricating oils used for purposes other than as motor fuels or as heating fuels — Not included — Excise duty levied on the consumption of energy products, imposed by a Member State pursuant to its own harmonised excise duty arrangements — Concept of ‘formalities connected with the crossing of frontiers’ — Article 110 TFEU — Shorter payment deadline in certain cases for intra-Community purchases than for products acquired on the domestic market

Significant points

  1. In this case, lubricating oils are products other than ‘excise goods’ within the meaning of Article 1(1) of Directive 2008/118, so that, in accordance with Article 1(3) of that directive, Member States may levy taxes on those products, provided that the levying of such taxes does not, in trade between Member States, give rise to formalities connected with the crossing of frontiers (see, to that effect, in relation to Article 3(1) and (3) of Directive 92/12, judgment in Fendt Italiana, EU:C:2007:411, paragraph 44).
  2. It follows that Article 1(3) of that directive does not preclude, in itself, Member States from imposing on products other than those subject to the harmonised excise duty arrangements a tax governed by rules identical to those relating to those arrangements.
  3. However, in order to comply with the requirements of Article 1(3) of Directive 2008/118, a tax charged on lubricating oils used for purposes other than as motor fuels or as heating fuels must not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.
  4. In that regard, it is clear from the case-law of the Court that, if the purpose of a formality imposed on the importer of a product subject to a national tax is to ensure payment of the debt corresponding to that tax, such a formality is related to the event giving rise to the tax, namely an intra-Community acquisition, and not to the crossing of a frontier in the sense of that provision (see, to that effect, judgments in Brzeziński, EU:C:2007:33, paragraphs 47 and 48, and Kalinchev, EU:C:2010:312, paragraph 27).
  5. According to settled case-law, a system of taxation of a Member State can be considered compatible with Article 110 TFEU only if it is proved to be so structured as to exclude any possibility of imported products being taxed more heavily than domestic products, so that it cannot in any event have discriminatory effect (see judgment in X, C‑437/12, EU:C:2013:857, paragraph 28 and the case-law cited).
  6. Subject to verification by the referring court, it appears that the deadline for payment of the excise duty due for lubricating oils imported under the duty suspension arrangement, beginning from their placing into circulation on the Polish market, is the same as that which is laid down for lubricating oils acquired on that market. Moreover, lubricating oils which are imported may be imported under the excise payment procedure, which results in a shorter deadline for paying the excise.

Noteworthy

Lack of jurisdiction of the court hearing the action by a consumer for a declaration of invalidity of a standard contract to hear the application for a declaration of unfairness of terms in the same contract

Judgment

C-567/13

12.02.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Reference for a preliminary ruling

Nóra Baczó and János István Vizsnyiczaiv.Raiffeisen Bank Zrt

CJEU

3rd Ch.

C. Toader

J. Kokott

Consumer Protection —Directive 93/12/EEC

Keywords

Reference for a preliminary ruling — Consumer protection — Directive 93/13/EEC — Article 7 — Mortgage loan agreement — Arbitration clause — Unfairness — Action by consumer — National procedural rule — Lack of jurisdiction of the court hearing the action by a consumer for a declaration of invalidity of a standard contract to hear the application for a declaration of unfairness of terms in the same contract — Principles of equivalence and effectiveness

Significant points

  1. It must be held that the jurisdiction of the county courts to hear actions which are brought on grounds based on EU law does not necessarily constitute a procedural rule which may be classified as ‘unfavourable’. The designation of those courts, which are less numerous and hierarchically superior to the local courts, may facilitate a more homogeneous and specialised administration of justice in cases concerning the rules arising from Directive 93/13.
  2. As regards the higher costs of justice which the applicant might incur before the county courts, it cannot be inferred from the sole fact of examining a case such as that at issue in the main proceedings before such courts that that undermines the principle of equivalence. Such an interpretation would amount to measuring the equivalence between safeguarding the rights that individuals derive from EU law on one hand and safeguarding the rights they derive from national law on the other, solely from the point of view of costs, and by ignoring the advantages of the procedure which is provided for actions based on EU law, such as those mentioned in the preceding paragraph.
  3. Observance of the principle of effectiveness requires that the organisation of the internal remedies must not, however, make it impossible or excessively difficult to exercise the rights individuals enjoy under EU law.
  4. The answer to the questions referred is that Article 7(1) of Directive 93/13 must be interpreted as meaning that it does not preclude a national procedural rule pursuant to which a local court which has jurisdiction to rule on an action brought by a consumer seeking a declaration of invalidity of a standard contract does not have jurisdiction to hear an application by the consumer for a declaration of unfairness of contract terms in the same contract, unless declining jurisdiction by the local court gives rise to procedural difficulties that would make the exercise of the rights conferred on consumers by the EU legal order excessively difficult. It is for the national court to carry out the necessary verifications in that respect.

Noteworthy

This judgment deals with the question of whether the fact that consumers in Hungary had to bring an action for the unfairness of a contract under Directive 93/13/EEC in front of a higher court and at greater cost than would have been the case for an action dealing with domestic law constituted breach of the principle of equivalence between EU and national law or of the principle of effectiveness. In this regard, the Court of Justice reiterated the case law according to which each Member State is able to designate the courts having jurisdiction for governing actions which safeguard the rights of individuals conferred under EU law. It then clarified that the fact that actions in front of the courts designated may cost more than in other courts is not necessarily unfavourable to potential applicants if those courts possess advantages for applicants. Therefore the procedure for actions relating to EU law does not need to be exactly the same as those dealing with national law in the same area of law. As regards effectiveness, the Court outlined certain factors which the referring court should bear in mind when deciding whether the procedure in Hungary adequately protected consumer rights.

Fruit and vegetable sector – Aid declared unlawful and incompatible with the internal market

Judgment

C-37/14

12.02.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Appeal

European Commission

v.

France

CJEU

8th Ch.

M. A. Ó Caoimh

M. Wathelet

State aid – Recovery of unlawful aid

Keywords

Failure to act by a Member State – State aid – ‘Contingency plans’ – Fruit and vegetable sector – Aid declared unlawful and incompatible with the internal market – Recovery – Non implementation

Significant points

  1. S’agissant des moyens invoqués par la République française pour sa défense, il y a lieu de relever que, selon une jurisprudence constante, le seul moyen de défense susceptible d’être invoqué par un État membre contre un recours en manquement introduit par la Commission sur le fondement de l’article 108, paragraphe 2, TFUE est celui tiré d’une impossibilité absolue d’exécuter correctement la décision en cause (voir, notamment, arrêts Commission/Italie, EU:C:2013:832, point 36, ainsi que Commission/Allemagne, C-527/12, EU:C:2014:2193, point 48 et jurisprudence citée).
  2. Selon une jurisprudence constante, le fait qu’un État membre éprouve la nécessité de vérifier la situation individuelle de chaque entreprise concernée n’est pas de nature à justifier la non-exécution d’une décision ordonnant la récupération (voir, notamment, arrêt Commission/Grèce, C-354/10, EU:C:2012:109, point 73 et jurisprudence citée).
  3. En ce qui concerne, en premier lieu, les différents motifs de non-récupération avancés par la République française, il y a lieu de constater que, si cet État membre a présenté à la Cour un ensemble volumineux de documents, en particulier dans son mémoire en duplique, concernant, notamment, les montants récupérés ainsi que ceux qu’il estime ne pas devoir récupérer, il ne fournit, en revanche, aucune donnée précise et concrète permettant de justifier pour chacun des bénéficiaires individuels concernés si les conditions prévues pour l’application desdits motifs de non-récupération sont réunies en l’espèce, se bornant à cet égard à des affirmations générales et abstraites concernant l’application de ceux-ci.
  4. S’il incombe à la Commission, comme l’a fait valoir la République française, d’établir l’existence du manquement allégué à l’obligation de récupération, en apportant à la Cour les éléments nécessaires à la vérification par celle-ci de l’existence de ce manquement, sans pouvoir se fonder sur une présomption quelconque (voir en ce sens, notamment, arrêt Commission/Allemagne, C-209/00, EU:C:2002:747, point 38), il appartient, en revanche, à l’État membre concerné, lorsque l’absence de récupération d’une partie ou de la totalité des aides en cause a été établie, de justifier les raisons pour lesquelles cette récupération ne serait pas requise en ce qui concerne certains bénéficiaires.
  5. En ce qui concerne l’allégation tirée de la disparition de nombreuses organisations de producteurs (OP), il y a lieu de constater que, si la République française invoque l’impossibilité absolue de récupérer les aides en cause auprès de certains producteurs membres d’OP qui ont fait l’objet d’une fusion-absorption au prix du marché avant la date de la publication de la décision d’ouverture de la procédure formelle d’examen des aides en cause, ou d’OP avec transfert de propriété qui ont été liquidées, cet État membre se borne, une nouvelle fois, à cet égard à des affirmations générales et abstraites concernant la prétendue perte des archives de ces OP qui auraient permis d’identifier leurs membres et l’impossibilité d’extrapoler le montant des aides versées par celles-ci à ces derniers, sans se référer à aucune démarche individuelle effectuée concrètement afin d’examiner la situation précise de chacune de ces OP en fonction des circonstances propres à chacune d’elles.
  6. En outre, les autorités françaises ont exclu de la récupération un montant d’aides d’environ 35 millions d’euros, hors intérêts, au seul motif qu’il correspond à des aides versées à des entreprises ayant fait l’objet d’un rachat ou d’une fusion-absorption dans des conditions de prix de marché. Or, une telle circonstance, même à la supposer avérée, n’affecte pas, en tant que telle, l’obligation de récupération, l’État membre concerné restant tenu de procéder à cette récupération, selon le cas, auprès de l’entreprise vendue (arrêt Allemagne/Commission, C-277/00, EU:C:2004:238, point 81) ou du vendeur (arrêts Banks, C-390/98, EU:C:2001:456, point 78, ainsi que Falck et Acciaierie di Bolzano/Commission, C-74/00 P et C-75/00 P, EU:C:2002:524, point 180).
  7. Par ailleurs, pour autant que ledit rapport mentionne que certaines entreprises ont été liquidées et démantelées, il convient de souligner que, selon une jurisprudence constante, le fait que des entreprises bénéficiaires sont en difficulté ou en faillite n’affecte pas non plus l’obligation de récupération de l’aide, l’État membre concerné étant tenu, selon le cas, de provoquer la liquidation de la société, de faire inscrire sa créance au passif de l’entreprise ou de prendre toute autre mesure permettant le remboursement de l’aide (voir arrêt Commission/Italie, C‑613/11, EU:C:2013:192, point 42 et jurisprudence citée). Or, le rapport en question se borne à indiquer que «les autorités françaises n’ont pas été en mesure d’inscrire la dette ‘plan de campagne’ au passif des entreprises concernées», sans justifier les raisons de cette absence d’inscription ni préciser l’identité de ces entreprises.
  8. Par ailleurs, il apparaît que, ni dans le délai initial de deux mois fixé à l’article 4 de la décision 2009/402 ni à une date ultérieure avant l’audience devant la Cour, la République française n’a communiqué à la Commission, en dépit du volumineux dossier transmis au stade du mémoire en duplique, toutes les informations requises, énumérées à cette disposition, concernant la liste des bénéficiaires des aides, le montant total d’aide reçu par chacun d’eux, le montant total à récupérer auprès de ceux-ci, les mesures prises ou prévues à cette fin ainsi que les documents démontrant qu’il a été ordonné aux bénéficiaires de rembourser l’aide.

Noteworthy

 This judgment, concerning the recovery of unlawful aid granted to fruit and vegetable producers in France, underlines the efforts that a Member State must undertake in order to recover aid which the European Commission has declared unlawful. In this case, France had not done enough to recover the aid nor justify the lack of recovery to the Commission. The Court of Justice applied established case-law in stating that France could not use the excuse that many of the beneficiaries had been liquidated or merged with other entities. It still had the obligation to recover the aid from the successor companies or liquidators, as the case may be, of the beneficiaries concerned.

Postal services – Quantity discounts – Application to intermediairies who consolidate postal items

Judgment

C-340/13

11.02.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Reference for a preliminary ruling

bpost SA

v

Institut belge des services postaux et des télécommunications (IBPT)

CJEU

2nd Ch.

 J.L. da Cruz Vilaça

/

Postal services

non-discrimination

Keywords

 Postal services — Directive 97/67/EC — Article 12 — Universal service provider — Quantity discounts — Application to intermediaries who consolidate postal items — Requirement of non‑discrimination

Significant points

1. The dispute at hand concerns an action for annulment brought by bpost against the decision of the IBPT imposing a fine on bpost for infringement of the principle of non-discrimination because of the application of the quantity discount per sender. In that decision, IBPT complained that bpost had denied the highest reductions on the quantities of mail supplied to the consolidators, despite the fact that they gave volumes of consolidated mail comparable to the volumes supplied by the largest senders. In consequence, that system discriminated against the consolidators.

  1. The CJEU quashed IBPT’s stand on the following grounds:

The objective of the quantity discounts is to stimulate demand in the area of postal services, which are currently faced with a growing choice of competing methods of sending, particularly that of electronic mail.

In this respect, when the consolidators hand on to bpost the mail which they have already collected from different senders, that does not have the effect of increasing the overall volume of mail in bpost’s favour. It follows therefrom that, except to the limited extent that those consolidators are themselves senders, their activity does not, of itself, contribute to the increase in the volume of mailings handed on to bpost.

Therefore, bulk mailers and consolidators are not in comparable situations as regards the objective pursued by the system of quantity discounts per sender since only bulk mailers are in a position to be encouraged, by the effect of that system, to increase the volume of their mail handed on to bpost and, accordingly, the turnover of that operator.

Consequently, the different treatment as between those two categories of clients which follows from the application of the system of quantity discounts per sender does not constitute discrimination prohibited under Article 12 of Directive 97/67.

In addition, the judgment in Deutsche Post and Others, when the Court held that Article 12 of Directive 97/67 precludes refusal to apply to consolidators of postal items from various senders the special tariffs which the national universal postal service provider grants to the senders themselves is not applicable to the present. Indeed, this case law did not involve quantity discounts, but operational discounts (that is to say discounts based on the costs actually avoided in relation with a given client) in respect with which consolidators and bulk mailers may be in the same situation.

Noteworthy

 This is a classic and orthodox application of the principle of non-discrimination, according to which, as a general rule, different situations must not be treated in the same way. For once, the application of this principle has actually benefitted a universal service provider against an overly zealous national regulator. Above these peculiarities of the case at hand, this principle means that a universal service provider in the postal sector may apply different conditions to users which are in objectively different situations.

Civil service – Officials – Psychological harrassment

Judgment

T-7/14

06.02.2014

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Appeals

BQ

V

Court of Auditors of the European Union

General Court

Appeal Ch.

M. van der Woude

/

Responsibility of the institution towards its staff

Keywords

 Civil service – Officials – Staff report – Psychological harassment – Partial dismissal of the claim for damages at first instance – Distortion of the clear sense of the facts – Obligation to state reasons on the part of the Civil Service Tribunal – Proportionality – Apportioning costs

Significant points

  1. By invoking a distortion of the clear sense of the facts without demonstrating how the Civil Service Tribunal would have distorted these facts, the applicant thus actually aims to obtain a new assessment of the facts which falls outside the jurisdiction of the General Court.
  2. The existence of a breach by the institution of its duty to assist people when an incident occurs cannot be confused with the question of the determination of the conditions according to which an incident triggers the institution’s duty to assist people.
  3. As a consequence, even though the Civil Service Tribunal would have committed an error of law in adding a condition to the wording of the article 24 of the Staff Regulations of Officials of the European Union, the applicant failed to demonstrate the Court of Auditors failure to act.
  4. Additional advice by medical experts is not such as to establish, by itself, the existence in law of a harassment or the existence of a default of the institution concerning its duty to assist people. It is not, therefore, sufficient to call into question the administrative investigations of the appointing authority.
  5. The Civil Service Tribunal may not infer argument of possible conflicts of interest when the applicant only establishes that he and his superiors worked with the investigator in his former service.

Noteworthy

Irish tax on air passengers – Decision declaring the aid incompatible with the internal market and ordering its recovery

Judgments

in

T-473/12

05.02.2015

and

T-500/12

05.02.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Actions for annulmemt

Aer Lingus Ltd

v.

European Commission

And

Ryanair Ltd

v.

European Commission

CJEU

 9th Ch.

 G. Berardis

/

State aid

Keywords

 Irish tax on air passengers — Lower rate for destinations no more than 300 km from Dublin — Decision declaring the aid incompatible with the internal market and ordering its recovery — Advantage — Selective nature — Identification of the beneficiaries of the aid — Article 14 of Regulation (EC) No 659/1999 — Obligation to state reasons

Significant points

 By Section 55 of the Finance Act (No. 2) 2008 (‘the Finance Act’), Ireland introduced an excise duty, known as the air travel tax (‘ATT’). When it was introduced, the ATT was levied on the basis of the distance between the airport of departure and the airport of arrival, at the rate of EUR 2 in the case of a flight from an airport to a destination no more than 300 km from Dublin airport (“national flight”) and EUR 10 in all other cases (“international flight”). The Commission adopted a decision according to which the form of a lower air travel tax rate was incompatible with the internal market pursuant to article 107(3) TFEU. Subsequently, Ryanair and Aer Lingus Ltd introduced actions for annulments.In order to establish the selective nature of the measure, it was necessary, first of all, to determine the reference system. The Commission defined the reference system as the taxation of air passengers departing on an aircraft from an airport in Ireland. The higher rate of EUR 10 applies to 85 to 90 % of all flights which were subject to the tax. Accordingly, the higher rate of EUR 10 had to be considered the normal rate of the reference system, while the reduced rate of EUR 2, which was applicable to a well delimited category of flights, was an exception from that reference system, and as a result constituted a State aid.However, the advantage actually obtained by the airlines does not necessarily consist in the difference between the two rates (i.e. 8 euros), but rather in the possibility of offering

It is only if the airlines had systematically increased the price of its tickets excluding tax by EUR 8 per ticket for flights subject to the ATT at the rate of EUR 2 that it would have been possible to consider that the economic advantage resulting from the application of the differentiated rates amounted to EUR 8 per passenger for the airlines, since that advantage could not have been passed on, even partially, to the passengers.

The recovery of an amount of EUR 8 per passenger from the airlines is therefore not necessary in order to eliminate the distortion of competition caused by the competitive advantage which such aid affords. On the contrary, the recovery of such an amount would be liable to create additional distortions of competition since it could lead to the recovery of more from the airlines than the advantage they actually enjoyed.

The Commission should, therefore, have taken into account the particular features of the ATT as an excise duty intended to be passed on to passengers by the airlines as regards all flights subject to the rate of EUR 2 during the period concerned. Inasmuch as the economic advantage resulting from the application of that reduced rate could have been, even only partially, passed on to the passengers, the Commission was not entitled to consider that the advantage enjoyed by the airlines amounted automatically, in all cases, to EUR 8 per passenger.

Specific developments in T-500/12

The differences between operators and the different economic impact of the measure on them is a more relevant argument in order to determine whether the Commission was entitled to quantify the State aid at EUR 8 per passenger for all of the airlines, rather than considering that certain airlines whose flights were subject to the lower rate of EUR 2 obtained a proportionally greater advantage than others under the ATT, and that those which benefited less from the ATT therefore did not obtain any advantage.

It must be considered that, even though the intervener does not support one specific applicant’s claims such as the one here above, it supports the form of order sought by the applicant, seeking the annulment of the contested decision, and that its arguments relating to the quantification of the advantage having regards to the relative extent of the advantage conferred on the various beneficiaries, are not entirely unconnected with the issues underlying the dispute as established by the main parties.

 

 

Noteworthy

We understand that the General Court states that the undertakings which are forced to apply the lower rate, may adopt two possible behaviours that would result in any case in advantages that are inversely proportional.

 Indeed, if the air carrier decide to keep the economic advantage resulting in the application of the lower rate, it will benefit from an operating aid, which will amount to EUR 8 by flight by passenger.

If, by contrast, the air carriers decide to pass on the advantage to the passenger, it will be able to offer more attractive price to them and therefore increase their turnover. In such case, the amount of the aid granted will depend on the resulting turnover increase.

 This last statement is quiet surprising and seems to be in contradiction with the settled opinion of the Commission in another area of State aid. Indeed, in the new guidelines on State aid to promote risk finance investments (see § 43), increasing turnover is considered as a “secondary economic effect of the aid measure” and cannot, therefore, be considered as an aid. In our opinion, only the tax reduction of EUR 8 by flight by passenger is attributable to the Irish State and constitutes a State aid.

 We also have reasonable doubts concerning the real impact of this tax differentiation on the turnover of an undertaking when the two rates apply on two different markets in the meaning of EU competition law.

Indeed, we consider that, by essence, international flights and national flights are not substitutable on the demand-side. The lower tax rate applied to national flights would not, therefore, reduce the number of passengers who need to travel outside the 300 Km radius around Dublin and be, by itself, the origin of a hypothetic turnover increase.

 In addition, we can deplore the difficulties of the Commission or, more probably, the Irish authorities to determine first, for each ticket sold at the lower rate by the air carriers whether the economic advantage arising from the application of the reduced tax have been or not passed on to the passenger and in which proportion then, the impact of this operation on the general turnover of the concerned air carriers. In this respect, the judgment of the General Court is apt to undermine the effectivity of State aid rules and the recovery of unlawful State aids. For all these reasons, we take the view that this judgment could be withheld by the CJUE on the grounds of infringement of the notion of State aid and infringement of the duty of loyal cooperation of the EU Institution towards national authorities in the view of the proper application of State aid rules.

Article 49 TFEU – Transfer of losses sustained by a non-resident subsidiary

Judgment

C-172/13

03.02.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Infingement proceedings – Failure to fulfil obligations

European Commission

v

United kingdom of Great Britain and Northern Ireland

CJEU

Grand Chamber

 M. K. Lenaerts

J. Kokott

Freedom of establishment

Keywords

 Article 49 TFEU — Article 31 of the EEA Agreement — Corporation tax — Groups of companies — Group relief — Transfer of losses sustained by a non-resident subsidiary — Conditions — Date to be used for determining whether the losses of the non-resident subsidiary are definitive.

Significant points

The Commission submits that Section 119(4) of the Corporation Tax Act 2010 (CTA 2010), as amended after the Mark & Spencer CJEU’s judgment, does not meet the requirements entailed for the Member State concerned by paragraphs 55 and 56 of this judgment in so far as, under that provision, the determination that it is impossible for losses sustained by a subsidiary established in another Member State, or in a non-member State party to the EEA Agreement, to be taken into account in the future must be made ‘as at the time immediately after the end’ of the accounting period in which the losses were sustained. According to the Commission, that provision has the effect of making it virtually impossible for a resident parent company to obtain cross-border group relief and as a result constitutes a disproportionate obstacle to the freedom of establishment.According to the Commission, Section 119(4) allows the resident parent company to take such losses into account in only two situations: (i) where the legislation of the Member State of residence of the subsidiary concerned makes no provision for losses to be carried forward and (ii) where the subsidiary is put into liquidation before the end of the accounting period in which the loss was sustained.The Court stated that the first of those situations referred to by the Commission is irrelevant for the purposes of assessing the proportionality of Section 119(4) of the CTA 2010. It is settled law that losses sustained by a non-resident subsidiary cannot be characterised as definitive, as described in paragraph 55 of the judgment in Marks & Spencer, by dint of the fact that the Member State in which the subsidiary is resident precludes all possibility of losses being carried forward. In such a situation, the Member State in which the parent company is resident may not allow cross-border group relief without thereby infringing Article 49 TFEU.As regards the second situation referred to, the Court stated that the Commission has not established the truth of its assertion that Section 119(4) of the CTA 2010 requires the non-resident subsidiary to be put into liquidation before the end of the accounting period in which the losses are sustained in order for its resident parent company to be able to obtain cross-border group relief. In addition, it is clear from the wording of that provision that it does not, on any view, impose any requirement for the subsidiary concerned to be wound up before the end of the accounting period in which the losses are sustained.The Commission submits that losses sustained before 1 April 2006 are excluded from cross-border group relief, contrary to Article 49 TFEU and Article 31 of the EEA Agreement, inasmuch as the provisions laid down in the CTA 2010 concerning that relief apply only to losses sustained after 1 April 2006, the date on which the Finance Act 2006 entered into force.

Again, the Court stated that the Commission has not established the existence of situations in which cross-border group relief for losses sustained before 1 April 2006 was not granted.

Consequently, the Court dismissed the action in its entirety.

Noteworthy

According to the judgment in Marks & Spencer, cross-border group relief is not required in principle by European Union law. Nevertheless, an exception applies in the case where losses incurred by a foreign subsidiary within the framework of foreign taxation cannot be taken into account either for past or for future tax years.

The Advocate General seems to plead for the abandonment of the Marks & Spencer exception due to its contradictions in relation to the Court’s other case-law on tax matters, which provides for a clear demarcation of the fiscal powers of the Member States. The Marks & Spencer exception does not either satisfy the requirement of legal certainty, but makes investment conditions unforeseeable and liable to give rise to disputes