Category Archives: European Single Market

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

Judgment
C-360/15 & C-31/16
30.01.2018
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.

Discrimination between banks providing savings accounts: a judgment good on principle but short on clear guidance

Judgment
C-580/15
08.06.2017
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Reference for preliminary rulingMaria Eugenia Van der Weegen v. Belgische StaatCJEU5th Ch.M. BergerN. WahlFreedom to provide services
KeywordsReference for a preliminary ruling — Free provision of services — Tax legislation — Income tax — Tax exemption reserved to interest payments by banks complying with certain statutory conditions — Indirect discrimination — Banks established in Belgium and banks established in another Member State
Significant pointsThe question referred to the CJ was whether or not the free provision of services and the free movement of capital must be interpreted as precluding a national tax exemption system, which is reserved de facto to income from savings deposits held with banks in Belgium. It followed upon a judgment of the CJ in June 2013 (C-383/10) holding that by reserving in an absolute way such an exemption to the savings deposits located in Belgium, a tax system infringed the free provision of services and required a (rather cosmetic) change to the regime. In this case, although the tax system was applicable without distinction to income received from savings deposits held with both banking service providers established in Belgium and also those established in other Member States of the EEA, the conditions which needed to be complied with in order for the tax exemption to apply meant that in effect it was reserved to banks in Belgium.

In the case at issue, Belgian residents had applied for the tax exemption regarding the income generated by savings deposits which were held with banking service providers established in Member State other than the Belgium. The Belgian administration refused the exemption to these taxpayers on the grounds that those financial institutions could not demonstrate that the savings deposit held with them complied with conditions similar to those applicable to Belgian regulated savings deposits. The applicants brought an action, therefore, before the national court which referred the ruling to the CJ.

The CJ decided to examine first the ruling in the light of Article 56 TFEU. Then, the CJ recalled that banking services constitute a service within the meaning of Article 57 TFEU.

The judges then looked at the conditions of the tax exemption at issue, namely that the deposits must be limited in order to distinguish them from a current account and that the remuneration received on savings deposits must necessarily and exclusively consist of basic interest and a fidelity premium. The judges held that there was no system of saving deposits in the EU that complied with the conditions laid down by the Belgian legislation other than those in Belgium. Thus, the CJ found that the national law, although applicable without distinction, has the effect of discouraging Belgian residents form using the services of banks established in those other Member States and from opening or keeping savings accounts with those latter banks since those deposits cannot benefit from the tax exemption.
Then, in a second step, the CJ determined whether such impediment could be justified by the reasons presented by the Belgian government. The latter argued that the national legislation aimed at contributing to consumer protection since it was crucial for Belgian residents to have a savings account that was sustainable, protected, stable and risk-free so as to cover their significant or unforeseen expenses. Even though it will be for the national judges to verify whether the restriction can be justified, the CJ stated that none of the arguments presented would be necessary to attain the objective argued by the Belgian government.

As a result, the CJ ruled that Article 56 TFEU and Article 36 of the EEA Agreement must be interpreted as precluding such national legislation which provides tax exemptions only to saving deposits held by Belgian banking service providers.
NoteworthyEven though not completely wrong, this judgment lacks coherence, precision, clarity and forcefulness.

First, the judgment states, on the one hand, that it is up to the referring national court to verify whether the legislation at issue addresses an overriding objective in the public interest, such as consumer protection (paragraph 40) and, if so, whether it does not go beyond what is necessary to attain that objective and complies with the principle of proportionality (paragraph 41). On the other hand, the CJ states that none of the arguments presented before it calls for the need for the conditions laid down in the national provision to attain the objective of consumer protection so that the latter cannot be invoked. Finally, the Court took the view that the national provision at hand infringes the free provision of services since it imposes conditions for access to the Belgian banking market on service providers established in other Member States, this being however a matter for the referring court to verify (paragraph 45 and operative provision of the judgment). What an excessively flexible reasoning! It leaves the door open for the national court to “save” an unjustifiable restriction to the free provision of services and could result in dozens of disputes before the national courts, like the former Parodi judgment (C-222/95 on 9 July 1997) of the CJ regarding banking loans. In our opinion, such a low level of argumentation does not fulfil the task assigned to the CJ to ensure that the interpretation and application of the Treaties is observed. After a first statement of non-fulfilment of its EU duties against Belgium in 2013 and the lack of a second request of statement of failure to enforce this judgment by the EU Commission, this recent judgment is unsatisfactory. It does not contribute in a decisive way to the effective application of EU law and to some extent constitutes an implicit encouragement to the Member States not to comply with judgments on the failure to meet their EU obligations.

Second, on the level of the legal principles, the CJ has missed an opportunity to acknowledge at least partially a principle of mutual recognition of services comparable to the principle of mutual recognition of goods as expressed in the Cassis de Dijon judgment. According to the latter, products lawfully produced in a Member State can also be marketed and sold in another Member State without restriction, except in case of overriding reasons of public interests. Indeed, where clients resort to banks located in another Member State (hypothesis of passive free provision of services), it is sufficient that the service provider complies with the law of the Member State of the bank.

On this judgment, see also Philippe GALLOY, “L’Europe condamne à nouveau le compte d’épargne belge », L’Echo, 8 June 2017.

CJEU judges that freedom to provide services prevents national legislation from imposing bans on online advertising for oral and dental care services

Judgment
C-339/15
04.05.2017
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Reference for preliminary rulingCriminal proceedings
against
Luc Vanderborght
CJEU3rd Ch.L. Bay LarsenY. BotFreedom to provide services
KeywordsNational legislation prohibiting, in absolute terms, advertising for oral and dental care services — Article 56 TFUE — Freedom to provide services — Protection of public health — Proportionality — Directive 2000/31/EC — Information society service — Advertising via an internet site — Member of a regulated profession — Professional rules — Directive 2005/29/EC — Unfair trading practices — National provisions relating to health — National provisions governing regulated professions
Significant pointsBy its judgment of 4 May 2017, the Court of Justice of the European Union (CJEU) stated that national legislation imposing a general and absolute prohibition of any advertising relating to the provision of oral and dental care services, notably through any online advertising, is contrary to EU law.

The present case concerned a Belgian qualified dental practitioner (Mr Luc Vanderborght) who advertised his dental services to patients including patients from other Member States between March 2003 and January 2014. These advertisements consisted in (i) a billboard outside his practice, (ii) advertisements published on a website and (iii) advertisements in local newspapers.

The Belgian professional association of dentists filed a complaint against Mr Vanderborght arguing that he had violated Belgian law, which prohibits in absolute terms any advertising relating to oral and dental care. The Court of First Instance of Brussels, before which the case was brought, decided to refer preliminary questions to the CJEU.

The CJEU considered that the Belgian legislation at issue is compliant with Directive 2005/29 (the Unfair Commercial Practices Directive) which does not call into question the national rules relating to the health and safety aspects of products or the specific provisions governing regulated professions (para. 28 and 30). However, it stated that Directive 2000/31 (Directive on electronic commerce) and Article 56 TFEU (freedom to provide services) preclude the Belgian general and absolute prohibition of respectively online and off-line advertising.

1. Directive 2000/31 (para. 50)

The aim of Article 8(1) of Directive 2000/31 is to grant members of a regulated profession the opportunity to use information society services (such as online advertising) in order to promote their activities. However such commercial communications have to be compliant with professional rules regarding the independence, dignity and honour of the profession of dentist, as well as its professional secrecy and fairness towards clients and other members of the profession. Nevertheless, in order to respect the practical effect of EU legislation, these professional rules cannot impose a general and absolute prohibition of any form of online advertising (websites) intended for the promotion of the performed activity (para. 43 and 44).

2. Article 56 TFEU (para. 76)

The protection of public health and the dignity of the profession of dentist, being overriding reasons in the public interest (para. 67 and 68), are capable of justifying a restriction on the freedom to provide services. However, in the present case, the objectives could be attained through the use of less restrictive measures (para. 75). Being disproportionate to the legitimate objective, the general and absolute prohibition had to be declared incompatible with EU law.
Noteworthy1. The Vanderborght case is in line with the general trend of the CJEU to quash general and absolute prohibitions on advertising as being disproportionate to a legitimate objective.

2. However, it is also a remarkable illustration of this case law to the extent that it relates to advertising in favour of (para) health care services. Contrary to the CJEU milestone judgment “Société fiduciaire nationale d’expertise comptable” of 5 April 2011 (C-119/09), which relied upon Directive 2006/123 to preclude national legislation which totally prohibited any canvassing, in the present case this directive was not considered at all. Indeed, Article 2(2)(f) of the relevant directive, as supported by recital 22, excludes healthcare services from its scope. In any case, it remains still questionable if dental care services (including those for aesthetic reasons) are included in the designation “healthcare services” and fall or not within the ambit of the Directive 2006/123.

3. In this regard, the Vanderborght case constitutes an important judicial precedent against the general and absolute prohibition of any advertising. On the one hand, plaintiffs can invoke the Directive 2000/31 on electronic commerce in respect of online advertising. This legal basis issued from secondary legislation is of fundamental importance given to the foreseeable expansion of electronic commerce in the future. On the other hand, they can invoke the provisions of the Treaty regarding the freedoms of circulation which can provide them more rights than some Directives like the Directive 2006/123.

Anything to declare ? Bringing cash into the EU

Judgment
C-17/16
04.05.2017
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Reference for preliminary rulingOussama El Dakkak
v
Administration des douanes et des droits indirects
CJEU1st Ch.R. Silva de LapuertaP. MengozziTransfer of funds
KeywordsReference for a preliminary ruling — Regulation (EC) No 1889/2005 — Controls of cash entering or leaving the European Union — Article 3(1) — Natural person entering or leaving the European Union — Obligation to declare — International transit area of a Member State’s airport
Significant pointsThe CJ was asked by the French Cour de cassation whether the obligation laid down in Regulation (EC) No 1889/2005 on controls of cash entering or leaving the Community to declare any sum greater than €10,000 transported in cash applied to a passenger merely transiting from one non-EU State to another non-EU State via an European airport. The CJ answered in the affirmative and stated that the obligation to declare any cash sum over €10,000 was indistinctively applicable to every person entering or leaving the EU, including international transit areas of airports located in the territory of EU Member States.

In the case, Mr El Dakkak was ordered by the Benin company Intercontinental to transport by aeroplane American dollars (USD) from Cotonou (Benin) to Beirut (Lebanon) via the French airport Roissy-Charles de Gaulle where customs officials checked him and found $1,607,650 (approximately €1,511,545) and €3,900 in cash in his possession, which he had not declared.

Regarding the notion of “entering the EU”, the CJ judged that it entailed in movement of a natural person from a non-EU territory to a territory which is part of the EU. Due to the fact that neither the Regulation (EC) No 1889/2005 nor any provision of the treaties exclude the international transit areas of European airports from the EU territory or even provide any exceptions, Mr El Dekkak was judged to have entered the EU and was therefore subject to the obligation to declare.

In this respect, the CJ referred not only to the usual meaning of a ‘natural person entering or leaving’ the EU, and to the notion of EU territory within the Treaties (which is, as a general rule, of relevance for the interpretation of the scope of an act of secondary legislation) but also to the objective pursued by the Regulation (EC) N° 1889/2005, its international context (recommendations of the FATF) and its practical effect. Notably, the CJ emphasized that the applicability of the obligation at issue was consistent with the objective pursued by Regulation (EC) No 1889/2005, i.e. the discouragement and avoidance of the introduction of illicit money into the financial system and its investment after laundering. In order to guarantee the effectiveness of the control system for cash entering or leaving the EU, the notion of a “natural person entering or leaving” the EU had to be interpreted in a broad manner.
NoteworthyThe free movement of capital and goods within the EU, along with the abolition of systematic internal border checks facilitate significantly the circulation of cash. Accordingly, some legal constraints had to be adopted in order to fight against money laundering and financing of terrorism. The unfortunate recent terrorist attacks which have occurred since the delivery of this judgment are unlikely to soften such an approach.

EU banking and financial law: A proper application of the principle of home country control and of the duty of mutual cooperation between authorities

Judgment
C-559/15
27.04.2017
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Reference for preliminary rulingOnix Asigurari SA
v
Istituto per la Vigilanza Sulle Assicurazioni (IVASS)
CJEU3rd Ch.J. MalenovskýY. BotHome country control principle and duty of cooperation with the host country
KeywordsReference for a preliminary ruling — Directive 73/239/EEC — Directive 92/49/EEC — Principle of single authorisation — Principle of supervision by the home Member State — Article 40(6) — Concept of ‘irregularities’ — Reputation of shareholders — Prohibition on insurance companies established in a Member State concluding new contracts within the territory of another Member State
Significant pointsThis request for preliminary ruling concerned the interpretation of Article 40(6) of Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC.

A dispute arose between Onix Asigurari SA, a Romanian insurance company, which has provided its services on the Italian market since 2012 under the freedom to provide services and the Istituto per la Vigilanza Sulle Assicurazioni (IVASS), the Italian insurance supervisory authority. According to the information provided by the Romanian financial supervisory authority (ASF) to the IVASS, the reference shareholder of Onix was found by the IVASS to have not satisfied the reputation requirements necessary to provide insurance cover in Italy under the principle of single authorisation.

Consequently and after the ASF’s inability to revoke Onix’s single authorisation, the IVASS adopted, inter alia, a decision on the basis of Article 40(6) of Directive 92/49 prohibiting Onix from concluding new insurance contracts in Italy, the aim being the protection of the interests of Italian insured persons.

After having lodged an unsuccessful complaint with the European Insurance and Occupational Pensions Authority, Onix brought the case before the GC, the Regional Administrative Court in Lazio (Italy) and the Italian Council of State. The latter decided to stay the proceedings and refer a preliminary question to the CJ regarding the principle of single authorisation for insurance undertakings and the supervision of their compliance with the reputation condition in the home Member State. More specifically, doubts were raised in the questions referred as to whether or not the supervisory authority of the Host Member State of an insurance operator was allowed to issue, in cases of emergency, decisions prohibiting the conclusion of new contracts in the host State for the reason of non-compliance with the requirement of good repute, being a precondition for the authorisation to engage in insurance business.

First of all, the CJ pointed out that, in accordance with the objective pursued by the directive, only the authorities of the home Member State were allowed to grant and withdraw the single authorisation to an insurance company and were therefore also competent to judge on the requirement of good repute of the companies’ directors (paragraphs 43, 44 and 49). However, the CJ concluded that the directive did not preclude that the Host Member States could adopt, in situations of emergency, appropriate measures in order to ensure the protection of the interests of insured persons against a real and imminent danger of irregularities committed on its territory (paragraph 50). Nevertheless, these specific prerogatives were only valid if the measures adopted were protective and pending a decision by the competent authority of the home Member State (paragraphs 49 and 52). The latter still had to take into account the evidence identified by the Member State where the services were provided in order to respect the principle of legal certainty (paragraph 52).
NoteworthyThis judgment is to be approved. It ensure the perfect application of two overarching principles of the normal EU regime of supervision of financial operators benefiting from a unique licence which is granted by a national competent authority (by contrast to the still more exceptional situations where the licence is granted by an EU authority like the ECB or the ESMA): the principle of home country control and the duty of fair cooperation between the home country authority and the host country equivalent. In addition, it requires that the Host Member State authority take measures where it establishes (i) a real and imminent danger of irregularities (ii) committed on its territory. Otherwise, the risk would be too great that the Host Member State circumvents the home country control principle.

Following the recent judgment of the General Court in T-122/15 Landeskreditbank Baden-Württemberg v. ECB concerning the Banking Union and the allocation of powers between the ECB and the national supervisory banking authorities, this case provides a perfect illustration of how prudential supervision may be shared between the authorities of the home Member State of the service provider and the host Member State where the service is provided.

Registration tax on leased or rented vehicles by Greek residents from suppliers established in another Member State

Judgment
C-66/15
14.01.2016
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Action for failure to fulfil obligationsEuropean Commission
v
Hellenic Republic
CJUE10th Ch.M.E. Levitis M. M. BobekFreedom to provide service
KeywordsPublic measures concerning the Failure of a Member State to fulfil obligations - Restriction to the freedom to provide services – Articles 56 to 62 TFUE - Leasing or renting of a vehicle by a resident of a Member State from a supplier established in another Member State – Imposition of the whole registration tax
Significant pointsBy collecting the full amount of a registration tax foreseen by its national legislation and payable by a supplier established in another Member State on vehicles which are rented or leased to a client residing in its national territory and by doing so without taking into account the duration of the rental contract or lease contract and the duration of the use of the vehicle in the national territory, the Hellenic Republic failed to fulfil its obligations under Article 56 – 62 TFEU.

The Court observes that the registration tax at issue applies to leased or rented vehicles that are not destined to be used on a permanent basis in the Member State. Moreover, the rental or leasing undertakings established in another Member State are liable to pay such a tax.

The imposition of the whole tax, which is calculated without taking into consideration the duration of the renting or leasing agreement for that vehicle or the length of time that that vehicle will be used in the national territory, could therefore disadvantage a vehicle leasing or renting undertaking established in another Member State in terms of the depreciation of such a tax, potentially dissuading it from providing its services.

In this respect, the Court states that the Greek legislation is such that it could discourage Greek residents to rent or lease a vehicle from an undertaking established in another Member State, insofar as it makes these operations more expensive; it consequently violates Article 56 TFUE by creating a restriction to freedom to provide services.
NoteworthyThe Court follows its well-established case law on the matter at issue, e.g. the judgment in Cura Anlagen (C-451/99) and orders van de Coevering (C-242/05) and Ilhan (C-42/08).
The Court also repeats that national registration tax rules are subject to the respect of the principle of proportionality and that this principle is violated, like in the case at hand, by imposing the entirety of such a tax on vehicles temporarily present in the Member State.

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

Services offered in Spain by pension funds and insurance companies established in another Member State

Judgment

C-678/11

11.12.2014

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Action for failure to fulfil obligations

European Commission

V

Kingdom of Spain

CJUE

 5 th Ch.

 C. Vajda

 /

Free provision of services –

EEA Agreement

Keywords

 Failure of a Member State to fulfil obligations — Article 56 TFEU and Article 36 of the EEA Agreement — Services offered in Spain by pension funds and insurance companies established in another Member State — Occupational pension schemes — Obligation to designate a tax representative resident in Spain — Restrictive nature — Justification — Effective fiscal supervision and prevention of tax avoidance — Proportionality

Significant points

  1. By having adopted provisions pursuant to which pension funds established in Member States other than the Kingdom of Spain and offering occupational pension schemes in that Member State and insurance companies operating in Spain under the freedom to provide services are required to appoint a tax representative resident in that Member State, the Kingdom of Spain has failed to fulfil its obligations under Article 56 TFEU, because they go beyond what is necessary to achieve the objectives of general interest pursued.

Indeed, national legislation giving pension funds established in Member States other than the Kingdom of Spain and offering occupational pension schemes in that Member State and insurance companies operating in Spain under the freedom to provide services the choice of appointing a tax representative or carrying out the tasks themselves, in accordance with the solution which they consider to be the most advantageous from the economic point of view, would be less prejudicial to the freedom to provide services than the general obligation to appoint such a representative imposed by the national legislation at issue (see, by analogy, judgments in Commission v Portugal, C‑267/09, EU:C:2011:273, paragraph 47, and National Grid Indus, C‑371/10, EU:C:2011:785, paragraphs 69 to 73).

  1. By contrast, the Commission’s application must be dismissed in so far as it seeks a declaration that the Kingdom of Spain has failed to fulfil its obligations under Article 36 of the EEA Agreement.

In that regard, the Kingdom of Spain expressly states that it has not concluded any agreement on the exchange of information with the Principality of Liechtenstein. Given that the Commission has not alleged that there are any bilateral agreements on mutual assistance in tax matters between the defendant Member State and the States party to the EEA Agreement which are non-EU members, it has not established the existence of mechanisms for the exchange of information and for cooperation sufficient to enable the Kingdom of Spain to obtain information on the taxes due and the collection of those taxes (see, by analogy, judgments in Commission v Portugal, EU:C:2011:273, paragraph 56, and Commission v Spain, EU:C:2012:439, paragraph 98).

Noteworthy

In line with a well-settled case law on the obligation to designate a tax representation resident in the Host Member State. The judgment results in the immediate disapplication of the national provisions considered incompatible with EU Law, and, if need be, in the duty for the Kingdom of Spain replace it by provisions which comply with EU Law within a reasonable deadline.

TFEU and EEA Agreement

Judgment

C-112/14

13.11.2014

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Appeal

European Commission v United Kingdom of Great Britain and Norhern Ireland

CJEU

8th Chamber

E. Jarašiūnas

P. Mengozzi

TFEU and EEA Agreement – Action for failure to fulfil obligations

Key-words

Free movement of capital — Articles 49 TFEU and 63 TFEU – Articles 31 and 40 of the EEA Agreement – National tax legislation — Attribution of gains to participators in close companies — Different treatment of resident and non-resident companies — Wholly artificial constructions — Proportionality

Summary

 In so far as that legislation is such as, first, to discourage residents of the United Kingdom, whether natural or legal persons, from contributing their capital to non-resident close companies and, secondly, to impede the possibility of such a company attracting capital from the United Kingdom, it constitutes a restriction of the free movement of capital, which is prohibited in principle by Article 63 TFEU.A national measure restricting the free movement of capital may thus be justified where it specifically targets wholly artificial arrangements which do not reflect economic reality and whose sole purpose is to avoid the tax normally payable on the profits generated by activities carried out on national territory (judgment in Itelcar, C‑282/12, EU:C:2013:629, paragraph 34 and the case-law cited).

It is clear, however, that the legislation at hand is not confined specifically to targeting wholly artificial arrangements which do not reflect economic reality and are carried out for tax purposes alone, but also affects conduct whose economic reality cannot be disputed. Furthermore, it does not allow the taxpayer concerned to provide evidence to show the economic reality of his participation in the company in question.

In addition, since it is common ground that the legislation at hand applies also to companies resident in a Member State of EFTA which is party to the EEA Agreement, and in so far as the provisions of Article 40 of the EEA Agreement have the same legal scope as the substantially identical provisions of Article 63 TFEU (judgments in Commission v Belgium, EU:C:2012:670, paragraph 88 and the case-law cited, and Commission v Finland, EU:C:2012:688, paragraph 53 and the case-law cited), all the foregoing considerations may, in circumstances such as those in the present case, be transposed mutatis mutandis to Article 40 of the EEA Agreement.

Noteworthy

Freedom to provide services – Taxation – Winnings from casinos

Judgment

Joint cases
C-344/13
and C-367/13

22.10.2014

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Reference for a preliminary ruling

Cristiano Blanco e.a.

v.

Agenzia delle Entrate – Direzione Provinciale I di Roma – Ufficio Controlli

CJEU

3rd Ch.

C. Toader

/

Freedom to provide services

Key-words

Freedom to provide services — Restrictions — Tax legislation — Income from winnings from games of chance — Difference in taxation between winnings obtained abroad and those from national casinos

Summary

Articles 56 and 52 TFEU preclude legislation of a Member State which subjects winnings from games of chance obtained in casinos in other Member States to income tax and exempts similar income from that tax if it is obtained from casinos in its national territory. A discriminatory restriction is compatible with EU law only if it falls under an express derogation, such as Article 52 TFEU to which Article 62 TFEU refers, and which is intended to safeguard public policy, public security and public health. Excluding the benefit of a tax exemption in a general manner would appear to be a disproportionate approach, to combatting money laundering, other methods being available to the Member States in this respect, such as Directive 2005/60 which is intended to combat money laundering and which applies to casinos.

Finally, taxation by a Member State of winnings from casinos in other Member States and the exemption of such winnings from casinos situated on its territory are not a suitable and coherent means of ensuring the attainment of the objective of combatting compulsive gambling, as such an exemption is in fact likely to encourage consumers to participate in games of chance which allow them to benefit from such an exemption.

Noteworthy

Classical judgment on discriminatory restrictions to freedom of circulation – tests of appropriateness and proportionality clearly and carefully operated.