Towards the extension of the right of establishment and the free provision of services to purely internal situations : Judgment of the CJEU in Grand Chamber in the Case C-31/16

C-360/15 & C-31/16
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Preliminary rulingX and Visser Vastgoed BeleggingenCourt of Justice Grand ChamberJ. L. da Cruz VilaçaM. M. SzpunarFreedom of establishment of service providers
KeywordsReference for a preliminary ruling — Services in the internal market — Directive 2006/123/EC — Scope — Concept of ‘service’ — Retail trade in goods — Chapter III — Freedom of establishment of service providers — Applicability in purely internal situations — Article 15 — Requirements to be evaluated — Territorial restriction — Zoning plan prohibiting the activity of retail trade in goods other than bulky goods in geographical zones situated outside the city centre — Protection of the urban environment
Significant pointsThis case mainly concerned the interpretation of Directive 2006/123/EC on services in the internal market (“Services Directive”). In this judgment, two Dutch courts (the Supreme Court and the Council of State) referred preliminary questions to the Court of Justice, which decided to join the cases.

In the second case (C-31/16), which we will focus on, the preliminary ruling stemmed from litigation in which an undertaking contested the decision of a municipal council which established a zoning plan, exclusively reserving a commercial area for bulky goods businesses and prohibited other retail businesses in that area.

The first question addressed by the Court was whether the activity of retail trade in goods such as shoes and clothing constitutes a ‘service’ for the purposes of the Services Directive. The latter generally defines a service as ‘any self-employed economic activity, normally provided for remuneration’. In this regard, the Court noted that the retail trade activity fulfills this definition and is not excluded by any other provision of the directive. In addition, the Court observed that Article 57 TFEU mentions activities of a commercial character as services, and that a recital of the Services Directive mentions that distributive trade is included in its scope. Therefore, it was held that the activity of retail trade falls within the scope of the concept of ‘service’ within the meaning of the Services Directive.

The second and most important question addressed by the Court was whether or not the provisions on the freedom of establishment of service providers of the Services Directive apply to a purely domestic situation or whether a cross-border element is required.

In answering this question, the Court looked at the wording of those provisions, their context and the objective pursued by that directive of creating an internal market for services as well as the Parliament's preparatory work of that directive, to rule, that these provisions also apply to a situation where all the relevant elements are confined to a single Member State. In particular, the Court asserted that the scope of the Services directive is capable of extending, in certain cases, beyond what is strictly laid down in the provisions of the FEU Treaty relating to freedom of establishment and the free movement of services, in order to ensure that the effet utile of the specific legal framework that the EU legislature intended to establish in adopting Directive 2006/123 is not undermined.

Finally, the Court addressed a question regarding the compatibility of the zoning plan with the provisions of the Services Directive on authorisation schemes and requirements. Firstly, the Court ruled out the application of the provisions on authorisation schemes to the zoning plan at hand as they do not provide a procedure to obtain a formal or implied decision from a competent authority but lay down instead rules of general application. The Court assessed the zoning plan with regard to Article 15 of the directive, relating to requirements for the provision of services to be evaluated by a Member State. Under this provision, a territorial restriction limiting access to a service activity or the exercise of a service activity is not prohibited, provided that the conditions of non-discrimination, necessity and proportionality are satisfied.

Even though it is for the referring court to assess whether these conditions are fulfilled, the Court observed that the objective of protecting the urban environment may constitute an overriding reason relating to the public interest that may justify a territorial restriction as the one at hand.
NoteworthyThe Court’s ruling, delivered in Grand Chamber (!) that the freedom of establishment of service providers as well as the freedom of provision of services also apply to purely domestic situations is of remarkable importance.

Such step towards further integration of the internal market in the matters of right of establishment and free provision of services can be compared from a conceptual standpoint to the Lancry case law (Case C-363/93) where the prohibition of customs duty was extended to an import of goods entering a region of a Member State from another part of the same State.

The practical meaning of the judgment in the Case C-31/16 must not be underestimated. More economic operators could be entailed to challenge measures restricting their activity in purely internal situations, such as territorial restrictions. Put in another words, it is not excluded that most of the case law of the ECJ regarding the right of establishment and the free provision of services could become of relevance in purely national disputes involving measures from public bodies affecting access to market and/or the way economic operators can carry out their activities, … provided that the activities and the matter of law at stake fall within the ambit of the Services Directive. In this respect, it can be recalled that the Services Directive does not apply notably to financial services and the field of taxation.

After ICAP, new developments from the Court of Justice to the notion of a ‘by object’ restriction

PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Non-contractual liabilityHoffmann-La Roche e.a. v Autorità Garante della Concorrenza e del MercatoCourt of JusticeGrand ChamberC.G. FernlundH. Saugmandsgaard ØeAntitrust – Concerted practice
KeywordsReference for a preliminary ruling — Competition — Article 101 TFEU — Agreements, decisions and concerted practices — Medicinal products — Directive 2001/83/EC — Regulation (EC) No 726/2004 — Allegations of risks associated with the use of a medicinal product for a treatment not covered by its marketing authorisation (off-label) — Definition of relevant market — Ancillary restriction — Restriction of competition by object — Exemption
Significant pointsThis case concerned the marketing of two medicinal products developed by Genetech, a Roche subsidiary, one for the treatment of cancer (Avastin) and the other for the treatment of ophthalmological conditions (Lucentis). Avastin was marketed by Roche itself through a licensing agreement with its subsidiary, while Novartis commercialised Lucentis through another licensing agreement with Genentech.

Following an investigation into these arrangements, the Italian Competition Authority imposed a fine on both pharmaceutical companies on the grounds of anticompetitive behavior pursuant to Article 101 TFEU. The authority found that they had concluded an agreement which was designed to disseminate misleading information relating to the adverse reactions resulting from the off-label use of Avastin in the field of ophthalmology.

The Italian Supreme Court, before which the case was brought on appeal, referred five questions to the Court of Justice for a preliminary ruling.

Firstly, the Court addressed a question related to the definition of the relevant market when a medicine is used outside of its marketing authorisation (MA). The Court considered that the fact that pharmaceutical products are manufactured or sold illegally prevents them, in principle, from being regarded as substitutable or interchangeable products. However, the Court noted that the EU rules on pharmaceutical products do not prohibit as such the off-label prescription of a medicine, provided that it complies with the conditions laid down in those rules. Given that compliance verification is not the responsibility of competition authorities but of pharmaceutical regulatory authorities (or national courts), the Court judged that, in order to assess whether a medicine whose MA does not cover the treatment of certain diseases falls within the same relevant market as a medicine with a MA, a competition authority must take into account the outcome of the compliance examination that may be carried out by the competent authorities (paras 48 to 61).

Secondly, the Court discussed whether the restriction described above may fall outside the scope of Article 101 TFEU as an ancillary restraint to a licensing agreement. This argument was promptly dismissed by the Court on two grounds: first, the disputed conduct was not designed to restrict the commercial autonomy of the parties to the licensing agreement but rather the conduct of third parties (in particular healthcare professionals); second, the restraint was agreed upon several years after the licensing agreement was concluded and so was not necessary for the latter (paras 68 to 75).

Finally, the Court addressed the main issue at stake, namely whether such an arrangement constituted a restriction of competition ‘by object’. The arrangement between the two undertakings marketing the two competing products concerned the dissemination of information, in a context of scientific uncertainty on the matter, relating to adverse reactions resulting from the use of one of those medicinal products for illnesses not covered by its MA, with a view to reducing the competitive pressure resulting from that use on another medicinal product covered by an MA covering those illnesses. On this point, the Court first noted that the fact that two undertakings colluded with each other with a view to disseminating information specifically relating to the product marketed by only one of them might constitute evidence that the dissemination of information pursues objectives unrelated to pharmacovigilance, given that pharmacovigilance obligations apply only to the company which markets the product. Then the Court observed that the dissemination of misleading information (i) encouraged doctors to refrain from prescribing the product, thus resulting in a reduction in demand, and (ii) constituted an infringement of the EU pharmaceutical regulations. Given these circumstances, the Court stated that the restriction at issue constitutes a restriction of competition ‘by object’ to the extent that the referring court confirms the misleading nature of the information communicated to the pharmaceutical regulatory authorities and the general public (paras 91 to 95).
NoteworthyA couple of weeks after the Icap judgment of the General Court (T-180/15), the Court of Justice brings further developments to the notion of a ‘by object’ restriction of competition. The Court confirms its use of this notion, which exempts competition authorities from the burden of proving the anticompetitive effect of a particular practice. The notion proves to be quite open and not limited to an exhaustive list. The Court indeed recalls that the ‘by object’ category is not limited solely to prima facie restrictions of competition. In this case, the infringement is an atypical consisting in the artificial creation of two different markets (even though it that has some analogies with a market-sharing cartel). The notion of ‘by object restriction’ also allows for consideration of the economic and legal context of the practice. In addition, in the case at hand, the Court relies on an in-depth analysis of the regulatory context of the agreement. On this basis, the Court uses the body of evidence method. On the one hand, it takes into account the incongruous nature of the agreement. On the other hand, the Court takes into consideration the "expected" result of the collusion. While it is well established case-law that anti-competitive intent is not a necessary element in determining whether an agreement has the object of restricting competition, the Court seems to recall here that this intention can nevertheless be taken into account.

Prévention du blanchiment : une précision bienvenue sur la portée du service de constitution de sociétés pour autrui

PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Non-contractual liabilityCORPORATE COMPANIES s.r.o. v Ministerstvo financí ČRCour de Justicepremière chambreMme R. Silva de LapuertaM. Y. BotAnti-blanchiment
KeywordsRenvoi préjudiciel – Prévention de l’utilisation du système financier aux fins du blanchiment de capitaux et du financement du terrorisme – Directive 2005/60/CE – Champ d’application – Article 2, paragraphe 1, point 3, sous c), et article 3, point 7, sous a) – Objet social d’une entreprise consistant en la vente de sociétés commerciales inscrites au registre de commerce et constituées aux seules fins d’être vendues – Vente réalisée par une cession de la participation de l’entreprise dans la société préconstituée
Significant pointsParmi les opérateurs économiques soumis au respect des règles en matière de prévention du blanchiment figurent les prestataires de services aux sociétés et fiducies en plus des commissaires aux comptes, experts-comptables externes, conseillers fiscaux, notaires et autres membres de professions juridiques indépendantes. Est, entre autres, visée toute personne physique ou morale qui fournit, à titre professionnel, le service de constitution des sociétés ou d’autres personnes morales (articles 2, paragraphe 1, point 3, sous c) et 3, point 7, sous a) de la directive 2005/60).

Corporate Companies est une personne morale établie en Tchéquie, dont l’objet social consiste à vendre des sociétés « ready-made », c’est-à-dire des sociétés déjà inscrites au registre du commerce. Les sociétés ainsi constituées n’exercent aucune activité. Il s’agit de « coquilles vides » figurant au sein du portefeuille constitué par Corporate Companies, dans l’attente d’une vente.

À la suite d’un contrôle par le ministère des Finances tchèque du respect par Corporate Companies des obligations fixées notamment par la loi anti blanchiment, la CJUE a été confrontée à la question de savoir si, en substance, une telle personne morale dont l’activité commerciale consiste à vendre des sociétés qu’elle a elle-même constituées, sans aucune demande préalable de la part de ses clients potentiels, aux fins d’être vendues à ces clients, au moyen d’une cession de ses parts dans le capital de la société faisant l’objet de la vente de l’arrêt.

La Cour a répondu par l’affirmative en se fondant tant sur le texte de la directive, l’intention du législateur que sur l’objectif de la directive.

Notamment, la directive n’opérerait pas de distinction selon qu’une société est constituée à la demande d’un client ou par le prestataire dans la perspective de sa vente ultérieure à un client potentiel.

En outre, la constitution d’une société présente des risques au regard du blanchiment des capitaux dans les deux hypothèses.

En effet, d’abord, la constitution d’une société représente elle-même une opération qui, par sa nature, présente un risque élevé de blanchiment de capitaux et de financement du terrorisme, en raison des transactions financières que cette opération comporte normalement, telles qu’un apport de capitaux et, le cas échéant, de biens, de la part du constituant de la société.
Ensuite, une société constitue une structure appropriée pour la réalisation tant du blanchiment de capitaux que du financement du terrorisme, en ce qu’elle permet de dissimuler des ressources obtenues illégalement, qui seront légalisées au moyen de cette société, ainsi que de financer le terrorisme par son intermédiaire.
Enfin, l’identification du client constitue un élément crucial de prévention de ces activités, ainsi que l’énonce le considérant 9 de la directive 2005/60. Il apparaît dès lors raisonnable que le législateur de l’Union ait soumis la création d’une telle structure par une personne ou par une entreprise au nom d’un tiers au contrôle prévu par cette directive, en établissant ainsi une première barrière afin de dissuader toute personne qui entendrait utiliser une société aux fins de faciliter ce type d’activités.

En conséquence, l’absence d’obligations en matière de prévention du blanchiment de capitaux et du financement du terrorisme à charge d’une personne telle que Corporate Companies, notamment l’obligation de vérifier l’identité du client et du bénéficiaire effectif, d’une part, servirait l’anonymat des acquéreurs réels des sociétés vendues ou des personnes agissant pour leur compte et, d’autre part, permettrait de masquer l’origine et la finalité des transferts patrimoniaux transitant par ces sociétés.
NoteworthyLa CJUE a retenu une interprétation large de la notion de fourniture à titre professionnel du service de constitution des sociétés ou d’autres personnes morales à des tiers, fondée sur l’effet utile de la directive anti blanchiment et le souci d’éviter tout contournement. L’application de la directive à de tels prestataires et à leurs opérations n’est pas subordonnée à l’existence d’un client déterminé préalablement à la réalisation de l’opération de constitution de la société.

L’approche apparaît commandée par la finalité de la directive de prévention des risques. Elle est également en phase avec la conception large de service en droit européen. Si la prestation d’un service recouvre généralement trois éléments, un prestataire, un service et un destinataire, les règles relatives à la prestation d’un service (par exemple la libre prestation des services comme dans l’arrêt du 10 mai 1995 Alpine Investments, C-384/93, ou en l’occurrence celles en matière de blanchiment) ne requièrent pas, pour leur application, la réunion de toutes ces conditions et notamment l’existence d’un destinataire déterminé préalablement à la fourniture de l’activité concernée, sous peine de vider les règles de leur effectivité.

Anti-money laundering: a welcome clarification as regards the application of AML rules to trust and company service providers incorporating shelf companies

PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Non-contractual liabilityCORPORATE COMPANIES s.r.o. v Ministerstvo financí ČRCourt of Justice1st ChamberMrs. R. Silva de LapuertaMr. Y. BotAnti-money laundering
KeywordsReference for a preliminary ruling — Prevention of the use of the financial system for the purpose of money laundering and terrorist financing — Directive 2005/60/EC — Scope — Article 2(1), point 3(c) and Article 3, point 7(a) — Business activity of an undertaking consisting in the sale of companies already entered in the Register of Companies and formed solely for the purposes of sale — Sale by means of the transfer of the undertaking’s holding in the ready-made company
Significant pointsAmong the economic operators subject to the rules on the prevention of money laundering is any natural or legal person acting in the exercise of its professional activities, who provides services to found companies or other legal persons (see Article 2 (1)(3)(c) and Article 3 (7)(a) of the Directive No 2005/60, the ”Directive”, now replaced by Directive 2015/849).

Corporate Companies is a legal entity, established in the Czech Republic. Its corporate purpose aims to sell companies “ready-made”, namely shelf companies that are already registered in the commercial register. The constituted companies don’t pursue any activity and are thus an empty shell until their sale to clients.

Following an enquiry by the Ministry of Finance of the Czech Republic on the respect by Corporate Companies of the obligations laid down notably in the anti-money-laundering law, the ECJ was confronted with the question of whether such a legal person, whose commercial activity consists in selling companies which it forms, without any prior request on the part of its potential clients but for the purposes of sale to those clients, by means of a transfer of its shares in the capital of the company being sold, is covered by the Directive.

The Court answered in the affirmative based on the wording of the Directive, the intention of the legislator and the purposes of the Directive.

First, the Directive does not make a distinction between whether the company was set up at the client’s request or by the service provider in the view of its subsequent sale to a potential client.

In addition, setting up companies raises risks regarding money-laundering of capitals in both cases.

Indeed, forming a company is in itself an activity which, per nature, presents a high risk of money laundering and terrorist financing. This is due to the financial transactions that this activity often includes (such as a capital injection, and, if appropriate, contribution of property in the stake constituting the company). Plus, a company may constitute an appropriate structure to effect both money laundering and terrorist financing, enabling the concealment of illegally obtained resources, which will be legalised through that company and used for the financing of terrorism. Furthermore, the identification of the client is crucial for the prevention of the aforementioned activities.

Given this, it seems reasonable for the EU legislature to make the creation of such a structure by a person or an undertaking in the name of a third party subject to the controls provided for by the Directive, by establishing an initial barrier to deter any person intending to use a company for the purpose of facilitating that type of activity.

Consequently, the absence of obligations in respect of the prevention of money laundering and terrorist financing imposed on a person, such as Corporate Companies, in particular the obligation to verify the identity of the client and the beneficial owner, would, first, help the actual purchasers of the companies sold or the persons acting on their behalf to remain anonymous and, secondly, would enable the masking of the origin and purpose of the property transfers passing through those companies.
NoteworthyThe ECJ holds a broad interpretation of the notion of provision of services consisting in forming companies or other legal persons to third parties, based on the effet utile of the anti-money laundering directive and in order to avoid any circumvention. The application of the directive to such service providers and their transactions is not subject to the existence of a specific client prior to the fulfilment of the operation forming the company.

The approach seems to be led by the purpose of the risk prevention directive No 2015/849. It is also in accordance with the broad conception of services under EU law. If the provision of a service covers generally three elements (a service provider, a service and a recipient), the rules relating to the service provision (for instance, the free provision of services like in the judgement rendered the 10th May 1995, in the case Alpine Investments, C-384/93, or in this case, the rules relative to anti –money laundering) do not need, for their implementation, that all these conditions be met. This includes the condition relating to the existence of a specific recipient prior to the achievement of the operations. Otherwise, the efficiency of the rules would be at risk.