Recent CJEU and GC views on the "economic advantage" element in State aid cases (C-559/12 and T-150/12)

In two recent cases, the Court of Justice of the EU (CJEU) and the General Court (GC) have reassessed the element of "economic advantage" required in the prohibition of State aid in Art 107(1) TFEU in connection with State guarantees in France and Greece. The element of advantage has ranked rather high in the list of issues recently submitted to public consultation by the European Commission as part of the forthcoming new Notice on the concept of State aid. Hence, it seems interesting to have a look at these cases.


Firstly, in its Judgment of 3 April 2014 in case C-559/12 France v Commission (La Poste), the CJEU assessed the Commission's previous findings regarding the existence of an unlimited guarantee granted by the French State to its postal operator (La Poste) as part of its status as an establishment of an industrial and commercial character (établissement public à caractère industriel et commercial, ‘EPIC’)--which entails a number of legal consequences, including the inapplicability of insolvency and bankruptcy procedures under ordinary law--and which ultimately constituted State aid within the meaning of Article 107(1) TFEU. The Commission's assessment had been endorsed by the GC (see comment here). The CJEU concurs with the substantive assessment of both the Commission and the GC in an interesting reasoning (and after having addressed a number of issues concerning the burden of proof that, in the end, remain largely marginal in view of the consolidation of a presumption of advantage in the case of unlimited State guarantees):

94 [...] it must be borne in mind that the concept of aid embraces [...] measures which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, therefore, without being subsidies in the strict sense of the word, are similar in character and have the same effect [...] Also, State measures which, whatever their form, are likely directly or indirectly to favour certain undertakings or are to be regarded as an economic advantage which the recipient undertaking would not have obtained under normal market conditions, are regarded as aid [...].
95 Since State measures take diverse forms and must be analysed in terms of their effects, it cannot be ruled out that advantages given in the form of a State guarantee can entail an additional burden on the State [...].
96 As the Court has already held, a borrower who has subscribed to a loan guaranteed by the public authorities of a Member State normally obtains an advantage inasmuch as the financial cost that it bears is less than that which it would have borne if it had had to obtain that same financing and that same guarantee at market prices [...].
97 From that point of view, moreover, the Commission Notice on the application of Articles [107 and 108 TFEU] to State aid in the form of guarantees specifically provides[...] that an unlimited State guarantee in favour of an undertaking whose legal form rules out bankruptcy or other insolvency procedures grants an immediate advantage to that undertaking and constitutes State aid, in that it is granted without the recipient thereof paying the appropriate fee for taking the risk supported by the State and also allows better financial terms for a loan to be obtained than those normally available on the financial markets.
98 It is apparent, [...] a simple presumption exists that the grant of an implied and unlimited State guarantee in favour of an undertaking which is not subject to the ordinary compulsory administration and winding-up procedures results in an improvement in its financial position through a reduction of charges which would normally encumber its budget.
99 Consequently, in the context of the procedure relating to existing schemes of aid, to prove the advantage obtained by such a guarantee to the recipient undertaking, it is sufficient for the Commission to establish the mere existence of that guarantee, without having to show the actual effects produced by it from the time that it is granted (C-559/12 at paras 94 to 99, emphasis added). 

Secondly, in its Judgment of 9 April 2014 in case T-150/12 Greece v Commission (aid to cereal production), the GC has also assessed a Greek guarantee scheme to cereal producers and has upheld the Commission's view whereby the conditions attached to such guarantee--i.e. initially, the acceptance of crops as collateral (although the existence of the guarantee rights and the conditions for their execution were not automatic) and later the potential charge of a 2% premium (again, which charge was not automatic)--did not dissipate the existence of an economic advantage for the beneficiaries of the guarantee scheme. The reasoning of the GC (in French) in paras 82 to 97 is interesting to grasp the unconditionality required of any measures intended to eliminate the (presumed) advantage that State guarantee schemes provide.

In my view, both Judgments are in line with the content of the Commission's Draft Notice on the concept of State aid (and, in particular, paras 111 to 117) and it seems now clear that unlimited State guarantees or State guarantees without actual (automatic) conditions (such as collateral and premia to be paid by the beneficiaries) will be ruled as being against Art 107(1) TFEU as a result of the iuris et de iure presumption of their conferral of an advantage.

CJEU stresses 'consumer interest' test under Art 34 TFEU and finds Spain guilty of "gold-plating" in transport services' regulation (C-428/12)

In its Judgment of 3 April 2014 in case C-428/12 Commission v Spain (new transport trucks) (only available in French and Spanish) the Court of Justice of the European Union (CJEU) has found Spain in breach of Art 34 and Art 36 TFEU due to the imposition of a disproportionate requirement in the system of authorisation of road transport services by companies not primarily engaged in road transport. In my view, the case is interesting because it deals once again with claims of justification based on road safety, in what seems to have become a topic in EU free movement of goods law [see C-110/05 Commission v Italy (mopeds) and, very recently, C-639/11 Commission v Poland (right steering wheel cars), discussed here and here].

 

In the case at hand, Spain had adopted regulations for the authorisation of companies providing ancillary road transport services that required that the age of the first heavy (ie above 3,500 kg) vehicle in the fleet of a (newly authorised) company did not exceed five months from its first registration. The Commission considered that this requirement infringed Art 34 TFEU and was not justified under Art 36 TFEU. One can wonder why the case was brought under this legal basis instead of the seemingly more appropriate of Art 49 TFEU (given that the system was concerned with a 'first' or new authorisation and, consequently, seemed to affect newly established transport companies particularly) or of Art 56 TFEU (on the provision of services, as the effect of the restriction surely would limit the offer of road transport services), although the (greater?) difficulty in justifying the existence of a cross-border impact and the exclusion of transport from the 2006 Services Directive may have played a role in the 'strategic' choice of legal basis by the Commission.

 

Taking the (uneasy?) approach of the restriction of the free movement of goods under Art 34 TFEU, the Commission considered that i) the Spanish rule constituted a measure having equivalent effect to a quantitative restriction on imports, ii) that such provision had the effect of restricting imports of heavy goods vehicles more than five months old from other Member States, and iii) that it violated the principle of mutual recognition and impeded access to the Spanish market, which had the effect of severely restricting the use of the vehicles concerned. The Commission also considered that neither road safety or environmental protection justifications could exempt the controverted rule. The CJEU rather keenly accepts the approach taken by the Commission and makes some interesting findings, not least consolidating the 'market access' test approach to the enforcement of Art 34 TFEU:

29 [...] it is clear from the case law that a measure, even if it does not have the purpose or effect of treating less favorably products from other Member States, is included in the concept of a measure equivalent to a quantitative restriction within the meaning of Article 34 TFEU if it hinders access to the market of a Member State of goods originating in other Member States (see, to that effect, Commission / Italy, C-110/05, EU: C: 2009:66, paragraph 37).

30 In this regard, the Court observes that the prohibition of use as the first vehicle in the fleet of vehicle with a maximum authorized mass exceeding 3.5 tonnes and more than five months old from the date of its first registration may have a considerable influence on the behavior of firms wishing to use a vehicle of this nature for complementary private transport, behavior which in turn can affect access of that product to the market of the Member State in question (C-428/12 at paras 29-30, own translation from Spanish).

The CJEU also consolidates the 'consumer interest' test in order to assess restrictions to market access:

31 [...] businesses, knowing that the use authorized [...] of a vehicle with a maximum authorized mass exceeding 3.5 tonnes and more than five months old from the date of first registration is restricted, will only have a limited interest in buying a truck like this for their complementary private transportation activities (see, to that effect, Commission / Italy EU: C: 2009:66, paragraph 57, and Mickelsson and Roos, EU: C: 2009:336, paragraph 27) (C-428/12 at para 31, emphasis added, own translation from Spanish).

The CJEU dismisses the claims for justification made by Spain, indicating that road safety could be protected by less intrusive measures (such as technical inspections, already in place) and also interestingly dismisses arguments based on the solvency of companies:

40 As regards [...] the other explanations given by the Kingdom of Spain [... such as] the proof of greater solvency of the company or even fostering better exploitation of vehicles for private complementary transport do not constitute reasons of public interest within the meaning of Article 36 TFEU or mandatory requirements within the meaning of the Court of Justice's case law (C-428/12 at para 40, own translation from Spanish).

In my opinion, the case is interesting because it consolidates the 'new' approach to the enforcement of Art 34 TFEU under a 'market access' test applied thorugh a 'consumer interest' (sub)test. It is also interesting because it continues to perpetuate the 'supremacy' of free movement of goods rules as the main analytical framework for the protection of the fundamental freedoms impinging the internal market.

Keep amassing your brand or it will be eaten up (C-409/12)

In its Judgment of 6 March 2014 in case C-409/12 Backaldrin Österreich The Kornspitz Company (Kornspitz), the Court of Justice of the EU (CJEU) has declared that a trademark is liable to revocation if, as a consequence of acts or inactivity of the proprietor, it has become the common name for the product from the point of view solely of end users of the product. The case interprets Article 12(2)(a) of Directive 2008/95 on the approximation of the laws of the Member States relating to trade marks (Codified version), which indicates that a trade mark is liable to revocation if "in consequence of acts or inactivity of the proprietor, it has become the common name in the trade for a product or service in respect of which it is registered". The contentious part of the provision concerned the interpretation of the term "trade".

 

In the case at hand, the professionals (intermediaries) in the Austrian baking sector are aware that 'Kornspitz' referred to a specific trademark for ‘flour and preparations made from cereals; bakery goods; baking agents, pastry confectionery, also prepared for baking; pre-formed dough … for the manufacture of pastry confectionery’. However, given that the owner of the brand (Backaldrin) produces a baking mix which it supplies primarily to bakers and then allows bakers and foodstuffs distributors to use the term 'kornspitz' in the sale of the bread rolls made with the trade marked mix, it was argued that consumers appreciate no distinctive character in the term 'kornspitz', which has become the standard name for a given mix of flours and seeds. Hence, one of Backaldrin's competitors challenged the 'Kornspitz' trade mark and applied for its revocation.

 

The CJEU accepted the argument and clarified that:

19 […] Article 12(2)(a) of Directive 2008/95 addresses the situation where the trade mark is no longer capable of fulfilling its function as an indication of origin (see, to that effect, Case C‑371/02 Björnekulla Fruktindustrier [2004] ECR I‑5791, paragraph 22).

20 Among the various functions of a trade mark, that function as an indication of origin is an essential one (see, inter alia, Joined Cases C‑236/08 to C‑238/08 Google France and Google [2010] ECR I‑2417, paragraph 77, and Case C‑482/09 Budějovický Budvar [2011] ECR I‑8701, paragraph 71). It serves to identify the goods or services covered by the mark as originating from a particular undertaking, and thus to distinguish those goods or services from those of other undertakings (see, to that effect, Case C‑12/12 Colloseum Holding [2013] ECR, paragraph 26 and the case-law cited). That undertaking is, as the Advocate General stated at point 27 of his Opinion, that under the control of which the goods or services are marketed.
[… 22] […] Article 12(2)(a) of the directive relates to the situation where the trade mark has become the common name and has therefore lost its distinctive character, with the result that it no longer fulfils that function (see, to that effect, Björnekulla Fruktindustrier, paragraph 22). The rights conferred on the proprietor of that mark under Article 5 of Directive 2008/95 may then be revoked (see, to that effect, Case C‑145/05 Levi Strauss [2006] ECR I‑3703, paragraph 33).

23 In the case described by the referring court [...] the end users of the  [...] bread rolls known as ‘KORNSPITZ’, perceive that word sign as the common name for that product and are not, therefore, aware of the fact that some of those bread rolls have been made using a baking mix supplied under the trade mark KORNSPITZ by a particular undertaking.

24 [...] that perception on the part of end users is due, in particular, to the fact that the sellers of the bread rolls made using that mix do not generally inform their customers that the sign ‘KORNSPITZ’ has been registered as a trade mark.

25 [...] the sellers of that finished product do not generally, at the time of sale, offer their customers assistance which includes an indication of the origin of the various goods for sale.

26 Clearly [...] the trade mark KORNSPITZ does not, in the trade in respect of the bread rolls known as ‘KORNSPITZ’, fulfil its essential function as an indication of origin and, consequently, it is liable to revocation in so far as it is registered for that finished product if the loss of its distinctive character in respect of that product is attributable to acts or inactivity of the proprietor of that trade mark (C-409/12 at paras 19-26, emphasis added).

 

The CJEU then goes on to assess whether the loss of distinctive character is attributable to the owner of the brand and finds that an insufficient insistence on the use of the term 'kornspitz' as a trade mark by bakers and foodstuffs distributors would be sufficient to trigger the revocation of the trade mark (paras 31-36). Indeed, the CJEU cleary stressed that

in a case [...] in which the sellers of the product made using the material supplied by the proprietor of the trade mark do not generally inform their customers that the sign used to designate the product in question has been registered as a trade mark and thus contribute to the transformation of that trade mark into the common name, that proprietor’s failure to take any initiative which may encourage those sellers to make more use of that mark may be classified as inactivity within the meaning of Article 12(2)(a) of Directive 2008/95 (C-409/12 at para 34, emphasis added).

Therefore, the standards of 'duty of care' or 'vigilance' applicable to trade mark owners are high and they will always be required to take (appropriate) positive steps to protect the distinctive character of the signs that they use to brand their products [for a law and economics discussion on the requirement of distinctiveness and the ensuing 'trade mark policying' obligations imposed on their owners, see Landes & Posner, 'Trademark Law: An Economic Perspective' (1987) 30 J.L. & Econ. 265, 287-288].

CJEU clearly indicates total lack of will to effectively become EU's constitutional court (C-206/13)

In its Judgment of 6 March 2014 in case C-206/13 Siragusa, the Court of Justice of the EU has continued developing its case law on the lack of applicability / jurisdiction to interpret the Charter of Fundamental Rights of the EU (CFREU) in purely domestic situations (which it had, amongst other instances, already indicated in Romeo).

In my view, the approach adopted by the CJEU is prone to create potential situations of reverse discrimination and may end up creating multiple (and possibly conflicting) standards of protection of fundamental rights in the EU with significant constitutional implications.

 

In the case at hand, the CJEU was presented with a question on the interpretation of the right to property recognised in article 17 CFREU and, more specifically, on whether it could be constructed as a limit against certain landscape protection rules applicable in Italy. The issue was raised by an Italian court hearing a dispute between an Italian citizen and an Italian public authority. Despite the efforts in trying to connect the situation with the (indirect) application of EU environmental law, the CJEU was not persuaded that there was a sufficient connection and, therefore, rejected to provide a substantive interpretation. The main argument of the CJEU was indeed that

30 [...] there is nothing to suggest that the provisions of Legislative Decree [...] fall within the scope of EU law. Those provisions do not implement rules of EU law [...].

31 It is also important to consider the objective of protecting fundamental rights in EU law, which is to ensure that those rights are not infringed in areas of EU activity, whether through action at EU level or through the implementation of EU law by the Member States.

32 The reason for pursuing that objective is the need to avoid a situation in which the level of protection of fundamental rights varies according to the national law involved in such a way as to undermine the unity, primacy and effectiveness of EU law (see, to that effect, Case 11/70 Internationale Handelsgesellschaft [1970] ECR 1125, paragraph 3, and Case C‑399/11 Melloni [2013] ECR, paragraph 60). However, there is nothing in the order for reference to suggest that any such risk is involved in the case before the referring court.

33 It follows from all the foregoing that it has not been established that the Court has jurisdiction to interpret Article 17 of the Charter (see, to that effect, Case C‑245/09 Omalet [2010] ECR I‑13771, paragraph 18; see also the Orders in Case C‑457/09 Chartry [2011] ECR I‑819, paragraphs 25 and 26; Case C‑134/12 Corpul Naţional al Poliţiştilor [2012] ECR, paragraph 15; Case C‑498/12 Pedone [2013] ECR, paragraph 15; and Case C‑371/13 SC Schuster & Co Ecologic [2013] ECR, paragraph 18) (C-206/13 at paras 30-33, emphasis added).

In my view, this line of reasoning (acknowledgedly, rather in line with art 51 CFREU and art 6 TEU) is clearly problematic. To begin with, because it clearly disconnects (implicitly, at least) the protection of the CFREU rights from EU citizenship (art 20 TFEU, coupled with the general prohibition of discrimination on the grounds of nationality in art 18 TFEU). The CJEU has clearly considered it insufficient that EU citizens can be granted different levels of protection of their CFREU rights at domestic level as a result of the application of the domestic laws as sufficient justification for intervention (i.e. to assume jurisdiction and provide legal interpretation). By restricting the goal of a common level of protection of CFREU rights to cases in which 'the unity, primacy and effectiveness of EU law' is affected and excluding its competence, the CJEU seems to forget that the CFREU is in itself EU law and, consequently, that it should be afforded the same treatment as the other Treaty provisions.

 

Secondly, the CJEU is laying down too strong foundations for unresolved problems of reverse discrimination. If the claimant in Siragusa had not been Italian and, consequently, a (very loose) connection to free movement rights could be established, the CJEU may have been willing to assess the intervention by the Italian State on the property of a (moving) EU citizen under a different light (worse still, that challenge could be easier for corporate claimants than for individuals, at least if they do not engage in an economic activity, since 'corporate citizens' could also be potentially protected by freedom of establishment).

 

In such a case, the trigger for the application of the CFREU would be equally unrelated to the content of the rights of the CFREU themselves and, sometimes, the trigger for CJEU intervention may simply result from the fact that the EU citizen affected exercised or not free movement rights--which, in my view, continues to create an unjustifiable discrimination between moving (proper) EU citizens and non-moving (unaware) EU citizens that can only continue to erode the potential development of the EU.

 

 

Finally, this line of reasoning may end up creating a situation where the (constitutional) courts of the Member States may be obliged to enforce at the same time conflicting standards of substantive protection for a given fundamental right, depending on the 'sorce of law' that controls it in a given situation. And that will surely be difficult to understand. How could 'my' right to private property be different under 'my' domestic constitutional law protection or under 'my' CFREU protection, depending on factors unrelated to me, my property, or the rules (primarily) applicable? Surely the compatibility between the CFREU and competing (superior) standards of protection (those derived from the European Convention on Human Rights) have (somehow) been ironed out in art 52(3) CFREU. However, the situation is not the same with (lower-ranking?) domestic standards of protection [art 52(4) CFREU is clearly insufficient for that task] and, in my view, the CJEU approach is not helpful in that regard either.

 

Therefore, the continued rejection of its role as a constitutional court of the EU and the increasing restriction of the scope of application of the CFREU in which the CJEU is engaged are, in my view, undesirable developments in EU law.

AG Mengozzi on extension of "in-house" to "public house" procurement exception (C-15/13)

In his Opinion of 23 January 2014 in case C-15/13 Datenlotsen Informationssysteme (not available in English), Advocate General Mengozzi advocated for an extension of the "in-house" public procurement exception beyond its current boundaries under the so-called Teckal doctrine.

 

The AG proposed that the CJEU declares that

A contract concerned with the provision of services which beneficiary, being a contracting authority within the meaning of Directive 2004/18, does not exercise over the entity that provides the services a control similar to that exercised over its own services, but where both entities are subject to the control of an institution that can be classified as a contracting entity within the meaning of that directive, and where both the recipient of the services and the provider thereof conduct the essential part of their activities for the institution that controls them, is a public contract to the extent that it is a written contract between the contractor and the recipient of the services, always provided that such contract has an object which would qualify as the provision of services within the meaning of the directive.

Such a contract is not entitled to an exception to the application of procurement procedures under the EU rules on public procurement unless the controlling entity exercises in an exclusive manner a control similar to that exercised over its own departments both on the beneficiary of the services and on the providing entity, and where both of those entities carry out the essential part of their activities for that controlling entity, or in the case where that contract meets all the requirements for the the exception for public-public cooperation (own translation from Spanish and French).

Therefore, AG Mengozzi suggests a test whereby, if all of the entities involved in the contract would independently qualify for the "in-house" exception in case they were engaged in a vertical contract with the ultimate controlling entity, they can then also benefit from the "public house" exception in their horizontal contractual relationships.

 

If the CJEU follows the approach suggested by AG Mengozzi, it will be extending the "in-house" exception beyond its current limits (where a direct control is required on the part of the contracting entity over the awardee of the contract) and creating a "public house" exception in public procurement--which was anticipated and discussed by Dario Casalini, 'Beyond EU Law: the New "Public House"', in Risvig Hansen et al (eds), EU Procurement Directives--modernisation, growth & innovation (Copenhagen, DJOF, 2012) 151-178.

 

It is also interesting to stress that such "public house" exception has also been created for the future by the new Public Procurement Directive (bound to be transposed by early 2016), which article 12(2) frames it in slightly different terms, indicating that the "in-house" exception:

also applies where a controlled legal person which is a contracting authority awards a contract to its controlling contracting authority, or to another legal person controlled by the same contracting authority, provided that there is no direct private capital participation in the legal person being awarded the public contract with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person (emphasis added).

It is important to stress that the requirements concerning private capital participation deviate from the standard "in-house" exception and (if adopted) from the "public house" exception, which may create some interpretative difficulties in the future. For now, I guess we need to wait and first see if the CJEU supports the "public house" exception as a first step, before worrying about the confines of a (private)-public house exception...

CJEU consolidates functional approach to customs nomenclature interpretation (C-380/12)

In its Judgment of 23 January 2014 in case C-380/12 X, the Court of Justice of the European Union (CJEU) was presented with a request for a preliminary reference on the proper interpretation of certain headings of the applicable customs nomenclature.

 

The case is riddled with technical (biochemical) complications but, in my best understanding of it, the key issues focussed on whether certain washing processes altered or not the molecular structure of a specific type of earth used to decolour edible oils. In the end, the dispute was concerned with a reclassification of that type of (washed) decolourising earth from a heading applicable to natural clays [which included those that had been washed (even with chemical substances eliminating the impurities, without changing the structure of the product)] to a heading applicable to activated natural mineral products (such as activated carbons, which structure has been altered). The impact of such a reclassification based on the alteration of the natural molecular structure of the product was the application of a higher tariff of 5.7% in customs duties. And, consequently, it was litigated.

 

In its Judgment, the CJEU follows its standard approach to this type of (fiendish) issue and makes it clear that it is for domestic courts to reach the final decision on nomenclature classification, but it aims to provide some general criteria to guide their decision.

 

In my view, the indication towards the need for a functional approach, based on the intended use of the products (rather than simply following a strict consideration of the production or treatment processes) seems worth highlighting. Indeed, in its Judgment, the CJEU indicated that:

39 [...] the intended use of a product may also constitute an objective criterion for classification if it is inherent to the product, and that inherent character must be capable of being assessed on the basis of the product’s objective characteristics and properties (see [Case C-183/06 RUMA [2007] ECR I‑1559], paragraph 36; Case C‑123/09 Roeckl Sporthandschuhe [2010] ECR I‑4065, paragraph 28; and [C-568/11 Agroferm [2013] ECR I-0000], paragraph 41).

40 It is apparent from the order for reference that the treatment applied to the products at issue in the main proceedings, batches of decolourising earth, consists in effecting a structural replacement of calcium ions with hydrogen ions in order to increase their adsorption capacity, which makes them suitable for purifying and decolourising edible oils. It is, furthermore, apparent from the observations put forward by the Commission at the hearing – without being contradicted on the point – that that treatment rules out the possibility of decolourising earth for purposes other than the purification and decolouration of edible oils (C-380/12, paras 39-40, emphasis added).

That does not mean that the issue of the actual change of the molecular structure of the product becomes irrelevant. As the CJEU also indicated:

46 [...] the treatment at issue in the main proceedings involves the use of chemical substances, more specifically sulphuric acid, which it is nevertheless for the referring court to verify. Accordingly, assuming that treatment does entail the elimination of impurities, which it is also for the national court to verify in the light of the answer to the first question referred, the decisive criterion for determining whether, under Note 1 to Chapter 25 of the CN, the products at issue must remain classified under CN tariff heading 2508, is whether their structure is changed.

48 The [International Convention on the Harmonised Commodity Description and Coding System, concluded at Brussels on 14 June 1983] Explanatory Notes, [...] despite their lack of binding force, are an important means of ensuring the uniform application of the Common Customs Tariff and, as such, may be regarded as useful aids to its interpretation (Case C‑173/08 Kloosterboer Services [2009] ECR I-5347, paragraph 25, and Agroferm, paragraph 28).

49 In that regard, the HS Explanatory Notes relating to heading 3802 state that ‘[c]arbon and mineral substances are said to be activated when their superficial structure has been modified by appropriate treatment (with heat, chemicals, etc.) in order to make them suitable for certain purposes, such as decolourising, gas or moisture adsorption, catalysis, ion-exchange or filtering’. Those same notes state that heading 3802 does not cover ‘[n]aturally active mineral products (e.g., fuller’s earth), which have not undergone any treatment modifying their superficial structure (Chapter 25)’.

50 Consequently, as rightly pointed out by the Commission, Note 1 to Chapter 25 of the CN, interpreted in the light of the HS Explanatory Notes relating to heading 3802, rules out the possibility that products which have undergone treatment modifying their superficial structure may be classified under CN tariff heading 2508, with the result that they must be classified under CN tariff heading 3802 (C-380/12, paras 46-50, emphasis added).

 

In my view, and if I understood the (technical) reasoning properly, the emphasis on the functional (i.e. intended-use) approach can help overcome truly difficult technical considerations (such as to what extent has the structure actually been modified or not), because the ultimate objective of the treatment given to the decolourising earths was to increase their decolourising properties and made them useless otherwise. Consequently, the CJEU seems to be advocating (in rather convoluted and implicit terms) for an application of the same nomenclature classification to products which are aimed at the same use (i.e., truly competing products).

 

If that is correct, this seems the right approach in order to minimise competitive distortions resulting from the interpretation and application of customs rules. Hence, I think that the functional approach that the CJEU has continued to consolidate in its Judgment in X (decolourising earths) should be welcome, unless I have gotten lost at molecular level disquisitions...

Free movement (of gold) meets consumer protection (C-481/12)

In its Judgment of 16 January 2014 in case C-481/12 Juvelta, the Court of Justice of the EU has issued an interesting decision concerned with the delicate balance between free movement of goods under Article 34 TFEU and the protection of consumers.

In the case at hand, gold jewellery was imported into Lithuania. The golden products had been stamped with the Polish hallmark to indicate their quality and fineness. The Polish and Lithuanian hallmarks differed in that Lithuanian rules require the express indication of the per thousand purity of the gold, whereas the Polish hallmark functions on a scale basis. Aware of such a divergence, the importer of the jewellery had complemented the Polish 'official' hallmark with a 'private mark' that expressly indicated the additional information necessary for Lithuanian consumers to understand the quality of the products. However, Lithuanian authorities were not willing to accept the validity of such 'private' second hallmark and required the products to be 'officially' marked again to comply with Lithuanian standards. The importer considered this an unjustified restriction of its free movement of goods rights and challenged the decision.

The CJEU framed the case within the standard Dassonville formula for the assessment of measures of equivalent effect to quantitative restrictions and offered some interesting insights into the limitations that consumer protection may introduce in that analytical framework. It is worth noting that, according to the CJEU,

23 In order to determine whether an indication of a standard of fineness not provided for by legislation of a Member State provides consumers with equivalent and intelligible information, the Court must take into account the presumed expectations of an average consumer who is reasonably well-informed and reasonably observant and circumspect (see, to that effect, Commission v Ireland, paragraph 32).

24 With regard to the proceedings [...] it should be noted that [...] the articles at issue in the main proceedings were stamped with hallmarks by an independent assay office authorised by the Republic of Poland, in accordance with that State’s legislation.

25 Likewise, [...] it is not disputed that the hallmark stamped on those articles shows their standard of fineness by means of the mark consisting of the numeral ‘3’ and that, in Poland, that mark is intended to denote articles of precious metals whose standard of fineness, expressed as the number of parts by weight of the precious metal in 1 000 parts by weight of the alloy, is 585.

26 It follows that the information provided by that mark is, as far as the articles of precious metal stamped with a hallmark in Poland are concerned, equivalent to that provided by the numerals ‘585’ on a hallmark stamped by an independent assay office authorised in Lithuania, in accordance with that State’s legislation.

27 That said, consideration must also be given to whether the marking of the numeral ‘3’ on the hallmarks stamped on the articles at issue in the main proceedings provides information intelligible to an average Lithuanian consumer who is reasonably well-informed and reasonably observant and circumspect.

28 In that regard, it must be held that it is probable that that mark is not intelligible to such a consumer, since such a person is not, in principle, deemed to know the Polish system of indicating standards of fineness for articles of precious metal.

29 However, although the restrictive effects of the legislation at issue can thus be justified by the objective of ensuring effective protection for Lithuanian consumers, and providing them with information relating to standards of fineness for articles of precious metal imported into Lithuania which are intelligible to them, such justification can be accepted only if that legislation is proportionate to the objective pursued, that is to say if, while appropriate in order to fulfil that objective, it does not go beyond what is necessary to attain it (C-481/12 at paras 23-29, emphasis added).

 

In Juvelta, then, the CJEU seems to have inserted an intermediate test of adequacy for consumer protection purposes that may need to be applied before the rule of reason analysis of the restrictive measure and in a cumulative manner. Hence, it seems that in situations where the application of free movement rules may leave consumers unprotected, the CJEU may be willing to set a limitation on the standard criteria of mutual recognition.

 

In general, then, it seems that the additional consideration of consumer protection/expectations comes to consolidate a 'suitability check' applied to the free movement rules (not to the measure having equivalent effect, which is still subjected to the traditional proportionality analysis) and, in that regard, seems fit for the purpose of ensuring overall consistency of the EU internal market rules--which, ultimately, should aim to protect consumers as well as allowing them to benefit from the increased efficiency that market competition brings about.

 

It may be that Juvelta does not create a revolution in the way free movement rules are applied (as such considerations had already occasionally been taken into account by the CJEU to a certain extent), but it may have spelled out more clearly the analytical path through which measures having equivalent effect against free movement of goods need to be assessed. In my view, this is a positive (incremental) development.

It's for the GC to decide, but it's not ok: CJEU rules on 'excessive duration' of competition law litigation (C-40/12 P)

In a batch of impatiently expected Judgments of 26 November 2012, the CJEU has ruled on the procedural and substantial rules applicable to a claim that (competition law) litigation before the General Court was of an 'excessive duration' and, consequently, breached Article 47 of the Charter of Fundamental Rights of the EU. In my view, this is another instance of a rather convoluted legal construction by the CJEU whereby it rejects its jurisdiction (on formal points), but actually addresses the substantial points in a way that leaves no room whatsoever for the GC when the matter is presented before it for a fresh consideraton--and, consequently, raises the question whether the system is sensibly designed to begin with...

 

In its Judgment in case C-40/12 P Gascogne Sack Deutschland (anciennement Sachsa Verpackung) v Commission, the CJEU has clearly indicated that

89 [...] the sanction for a breach, by a Court of the European Union, of its obligation under the second paragraph of Article 47 of the Charter to adjudicate on the cases before it within a reasonable time must be an action for damages brought before the General Court, since such an action constitutes an effective remedy.

90 It follows that a claim for compensation for the damage caused by the failure by the General Court to adjudicate within a reasonable time may not be made directly to the Court of Justice in the context of an appeal, but must be brought before the General Court itself.

91 As regards the criteria for assessing whether the General Court has observed the reasonable time principle, it must be borne in mind that the reasonableness of the period for delivering judgment is to be appraised in the light of the circumstances specific to each case, such as the complexity of the case and the conduct of the parties (see, in particular, Der Grüne Punkt – Duales System Deutschland v Commission, paragraph 181 and the case-law cited).

92 The Court has held in that regard that the list of relevant criteria is not exhaustive and that the assessment of the reasonableness of a period does not require a systematic examination of the circumstances of the case in the light of each of them, where the duration of the proceedings appears justified in the light of one of them. Thus, the complexity of the case or the dilatory conduct of the applicant may be deemed to justify a duration which is prima facie too long (see, in particular, Der Grüne Punkt – Duales System Deutschland v Commission, paragraph 182 and the case-law cited).

93 In examining those criteria, it must be borne in mind that, in the case of proceedings concerning infringement of competition rules, the fundamental requirement of legal certainty on which economic operators must be able to rely and the aim of ensuring that competition is not distorted in the internal market are of considerable importance not only for an applicant itself and its competitors but also for third parties, in view of the large number of persons concerned and the financial interests involved (see, in particular, Der Grüne Punkt – Duales System Deutschland v Commission, paragraph 186 and the case-law cited).

94 It will also be for the General Court to assess both the actual existence of the harm alleged and the causal connection between that harm and the excessive length of the legal proceedings in dispute by examining the evidence submitted for that purpose.

95 In that regard, it should be noted that, in an action for damages based on a breach by the General Court of the second paragraph of Article 47 of the Charter, in so far as it failed to have regard to the requirement that the case be dealt with within a reasonable time, the General Court must, in accordance with the second paragraph of Article 340 TFEU, take into consideration the general principles applicable in the legal systems of the Member States for actions based on similar breaches. In that context, the General Court must, in particular, ascertain whether it is possible to identify, in addition to any material loss, any other type of harm sustained by the party affected by the excessive period, which should, where appropriate, be suitably compensated.

96 It is therefore for the General Court, which has jurisdiction under Article 256(1) TFEU, to determine such claims for damages, sitting in a different composition from that which heard the dispute giving rise to the procedure whose duration is criticised and applying the criteria set out in paragraphs 91 to 95 above (C-40/12 P at paras 89-96, emphasis added).

So far, the general framework depicted by the CJEU makes sense and, even if it creates a potential problem of conflict of interest derived from the 'self-assessment' required from the GC (despite its seating in a different composition), the remedy is clearly outlined and the material or substantive conditions that should be taken into account are also spelled out in a relatively easy to apply test (although some deference towards lengthy competition litigation seems to be readable between the lines).

 

However, the temptation ends up being too strong and the CJEU, maybe aware of the intractability of that conflict of interest, cannot refrain itself from actually settling the matter (despite concluding it has to reject the ground for appeal!). Hence, the CJEU carries on to make clear that

97 That said, it must be stated that the length of the proceedings before the General Court, which amounted to approximately 5 years and 9 months, cannot be justified by any of the particular circumstances of the present case.

98 It is apparent, in particular, that the period between the end of the written procedure, when the Commission’s rejoinder was lodged in February 2007, and the opening, in December 2010, of the oral procedure lasted for approximately 3 years and 10 months. The length of that period cannot be explained by the circumstances of the case, whether it be the complexity of the dispute, the conduct of the parties or supervening procedural matters.

99 As regards the complexity of the dispute, it is apparent from examining the action brought by the appellant, as summarised in paragraphs 12 and 13 above, that, while requiring a detailed examination, the pleas relied on did not present any particular difficulties. Although it is true that around 15 addressees of the contested decision brought actions for its annulment before the General Court, that fact could not prevent it from scrutinising the documents in the case and preparing for the oral procedure within a period of less than 3 years and 10 months.

100 It must be pointed out that, during that period, the procedure was not interrupted or delayed by the adoption of any measures of organisation of procedure by the General Court.

101 As regards the conduct of the parties and supervening procedural matters, the fact that the appellant requested, in October 2010, the reopening of the written procedure cannot justify the period of 3 years and 8 months which had already elapsed since it was closed. In addition, as the Advocate General observed in point 134 of her Opinion, the fact that the appellant was notified in December 2010 that there would be a hearing in February 2011 shows that that procedural matter had only a minimal effect on the overall length of proceedings, or even no effect at all.

102 In the light of the foregoing, it must be found that the procedure in the General Court breached the second paragraph of Article 47 of the Charter in that it failed to comply with the requirement that it adjudicate within a reasonable time, which constitutes a sufficiently serious breach of a rule of law that is intended to confer rights on individuals (Case C-352/98 P Bergaderm and Goupil v Commission [2000] ECR I-5291, paragraph 42).

103 It is, however, clear from the considerations set out at paragraphs 81 to 90 above that the fourth ground of appeal must be rejected (sic) (C-40/12 P at paras 97-103, emphasis added). 

In my view, even if there is no question that the formal treatment of the claim for damages (ie the ground for appeal) is correct, the fact that the CJEU felt the urge to settle the matter from a substantive perspective shows that the attribution of the competence to hear cases concerned with the excessive duration of litigation before the GC to the GC itself (albeit in a different seating) makes poor sense and is likely to result in almost 100% of cases in a further appeal before the CJEU.

 

To be fair, if the CJEU assumed the competence from the beginning, other problems derived from a single-step or one-shot system where the claims would be shielded from potential appeals would also arise. So, it looks like we may be facing one of those areas where a clear limitation of the institutional design of the EU Courts seems apparent and where pressure for the future potential referral of the cases to the Strasbourg Court may be felt.

 

However, as indicated yesterday when commenting a timely editorial opinion of Advocate General Sharpston (here), it may well be that the granting of excessive procedural rights to competition law defendants end up in an unmanageable workload for the EU Courts (as well as for the European Court of Human Rights) and, consequently, a deeper revision of the system seems necessary [see my further developed aruments in The EU’s Accession to the ECHR and Due Process Rights in EU Competition Law Matters: Nothing New Under the Sun?].

CJEU kicks new #concessions Directive in the shins (C-388/12)

In its Judgment of 14 November 2013 in case C-388/12 Comune di Ancona, the CJEU has put forward an argument for the existence of cross-border interest in the award of (public service) concession contracts that openly challenges the quantitative rationale followed by the planned new Directive on Concessions.

The new Directive on Concessions is premised on the basis that cross-border interest will (only?) exist where the value of the contract is above €5 million, calculated as the estimated total turnover of the concessionaire generated over the duration of the contract, net of VAT (art 6). This is clearly indicated in its Recital (10):

This Directive should only apply to concession contracts whose value is equal to or greater than a certain threshold, which should reflect the clear cross-border interest of concessions to economic operators located in other Member States (emphasis added).

Such a quantitative approach to determining the existence of a cross-border interest may be difficult to reconcile with the qualitative approach followed by the CJEU in Comune de Ancona.

In the case at hand, a concession for the management of a European Regional Development Fund (ERDF)-supported portuary infrastructure (a slipway) was directly awarded by the Comune di Ancona to the local fishermen cooperative. The justification provided for the direct award was, rather simply, that 'it was not necessary, for the purposes of granting a concession for management of the slipway, to publish a call for tenders, in so far as no operators apart from the Pescatori cooperative were interested in that concession' (C-388/12 at para 16). In part, one of the reasons to consider that there would be no other bidder for the concession was that the concession was awarded

subject to a number of conditions. These included the obligation to pay the Comune di Ancona an annual charge calculated in such a way as to avoid substantial net revenue being generated for either the concession-granting authority or the concessionaire; a prohibition on modifying the implementation conditions of the operation eligible for funding; a prohibition on engaging in profit-making activity; the obligation to comply with all the applicable EU directives and standards; and the obligation to maintain the public-service function and intended use of the structure at issue. It was also stated that the slipway was to remain, in any event, the property of the Comune di Ancona (C-388/12 at para 12).

In a thoughtful and market-realistic approach to the existence of potential (corporate) interest in being awarded a non-revenue generating concession as a first step into a new market, the CJEU has clearly indicated that

50 [...] the Comune di Ancona has not invoked any objective facts capable of explaining the lack of any transparency in the award of the concession. On the contrary, it maintained that the concession was not liable to interest undertakings located in other Member States, in so far as the concession granted to the Pescatori cooperative was designed so as not to be capable of generating substantial net revenue for its beneficiary or an undue advantage for the latter or for the municipality.

51 However, the fact that a concession is not capable of generating substantial net revenue or an undue advantage for an undertaking or for a public body does not, in itself, support the inference that the concession is of no economic interest for undertakings located in Member States other than that of the contracting authority. In the context of an economic strategy to extend part of its activities to another Member State, an undertaking may take the tactical decision to seek the award in that State of a concession despite the fact that that concession is incapable as such of generating sufficient profit, since that opportunity could nevertheless enable the undertaking to establish itself on the market of that State and to make itself known there with a view to preparing its future expansion.

52 [...] in circumstances such as those of the case before the referring court, EU law does not preclude the award, without a call for tenders, of a public service concession relating to works, provided that that award is consistent with the principle of transparency, observance of which, without necessarily entailing an obligation to call for tenders, must make it possible for an undertaking located in the territory of a Member State other than that of the contracting authority to have access to appropriate information regarding that concession before it is awarded, so that, if that undertaking so wishes, it would be in a position to express its interest in obtaining that concession (C-388/12 at paras 50-52, emphasis added).

In my view, the argument used by the CJEU in para 51 of Comune di Ancona is sound in terms of business strategy and makes perfect sense. However, even if it focusses on 'net revenue' and the threshold of Art 6 of the future Concessions Directive only refers to 'total turnover' (hence, they are not in stark conflict, as the threshold may catch concessions with a high turnover but very low operational or commercial margins), the qualitative approach followed by the CJEU should trigger some red flags.

 

I find that this shows that the quantitative approach adopted by the future Directive on Concessions will not mark the end of the story in the ongoing discussion regarding the rules and requirements applicable to contracts not covered by the procurement Directives--and, more specifically, to services concessions. It seems to me that a dual legal regime will persist between 'Directive concessions' and 'Ancona concessions', where the CJEU will continue pointing out to the potential existence of cross-border interest for concessions with a value below €5mn (or in the excluded and preferential sectors, such as water or social services).

 

If that is so, the passing of the new Directive on Concessions will only have increased legal complexity in this area and should not be seen as a necessarily positive development [as discussed in A Sánchez Graells, 'What Need and Logic for a New Directive on Concessions, Particularly Regarding the Issue of Their Economic Balance?' (2012) European Public Private Partnerships Law Review 2: 94-104]. I guess that, once more, we will need to keep an eye on further developments of the CJEU case law.

Missed opportunity for the CJEU to confirm 'non bis in idem' in State aid enforcement (C-560/12 P and C-587/12 P)

In contrast to its very recent Judgment in case C-77/12 P Deutsche Post, where the CJEU clearly barred the European Commission from adopting an indefinite number of 'follow up' decisions concerned with a single State aid investigation (in what I read as an incipient 'ne bis in idem principle' in State aid enforcement); in its  twin Judgments of 7 November 2013 in case C-560/12 P Wam Industriale v Commission and in case C-587/12  P Italy v Commission (only available in French and Italian), the CJEU has brushed aside a similar argument on the basis of its insufficient development by the appellant (C-560/12 P) and (implicitly) on the basis of the lack of independent legal effects of the fresh assessment carried out by the European Commission of the evidence on file after the initial decision had been quashed at judicial review (C-587/12 P). In my view, the Deutsche Post and (the set of) Wam Judgments are difficult to reconcile

 

In Wam, the European Commission had adopted a 2004 decision declaring the unlawfulness of State aid granted by the Italian State to support market expansion projects in Japan, Korea and China. After the quashing of the Commission's 2004 Decision by the GC in 2006 (T-304/04 and T-316/04) and the confirmation of that decision in 2009 by the CJEU (C-494/06), the Commission adopted a new incompatibility Decision in 2010.

 

In its challenge against the Commission's 2010 Decision (C-560/12 P), Wam argued that

the contested [2010] decision is not [merely] vitiated either by a 'procedural irregularity' or a 'formal defect', since the failure to state reasons does not constitute such a defect, but it rather lacks an "essential element", which effectively determines its nullity. In this case, therefore, there is a subjective claim preclusion between the parties [res iudicata] and, accordingly, the Commission, being under the obligation to give effect to the judgments of the Court in Italy and Wam v Commission [T-304/04 and T-316/04] and Commission v Italy and Wam [C-494/06], could not "in any way have adopted a new decision on the matter". The Court should therefore "for this [reason] only", have annulled the contested decision (C-560/12 P, para 6, own translation from Italian).

The argument sounds very similar to the one raised by Deutsche Post (although in that case the 'follow up' decision was not concerned with a full reassessment of the same measures, but with a fresh assessment of measures not expressly considered in the initial Decision eventually quashed), which the CJEU analysed in detail and actually backed in C-77/12 P.

However, in Wam the CJEU does not show the same appetite for the development of a strong limit on the Commission's ability to reopen a case after losing it on appeal (a sort of procedural estoppel or ne bis in idem), and dismisses the argument on the (very formal basis) that

15 By the first part of the first plea, it should be noted that the applicant merely submits that, for the mere fact [of the existence of] the judgments of the Court in Italy and Wam v Commission and Commission v Italy and Wam, the Commission would have been in any case precluded from adopting a new decision.
16 In that regard it should be noted that the argument concerning that matte is limited to a dozen lines on pages 26 and 27 of the appeal, the substance of which is taken up in paragraph 7 [sic, 6] of this judgment.
17 However, such an argument, marred by a lack of precision, clearly does not fulfill the conditions laid down in Article 169, paragraph 2, of the Rules of Procedure of the Court. Consequently, it must be rejected as inadmissible (C-560/12 P, paras 15-17, own translation from Italian).

In my view, in adopting this approach, the CJEU has been too keen to take an easy way out and has missed an opportunity to reaffirm and give further guidance on the limits applicable to the reopening of State aid investigations by the European Commission. However, the CJEU does look into more detail to a similar submission made by Italy in the other Judgment concerned with the same State aid measures, of the same date (C-587/12 P).

According to the Italian Republic,

7 [ ...] the Court erred in holding that the Commission did not have an obligation to open a new contradictory investigation procedure with the national authorities. Contrary to what the Court found, the point would not have been to establish, in general and in theory if, after a judgment of annulment for failure to state reasons, the Commission could or could not take up the procedure from the adoption of the [annulled] act.
8 The Italian Republic considers that, given that the Commission has "renew[ed] completely" the examination of all matters in the contested decision, introducing new facts, it has hence recognized that the "defects criticized", despite being considered as defects of the duty to state reasons, actually had substantial implications that made ​​it necessary to "redo from scratch" the 2004 decision.
9 The Italian Republic considers that the [...] factual elements consisting of the alleged "relative strengthening" of Wam and the alleged "freeing up of resources" could never have been deducted from the [initial] investigation procedure. Consequently, them being decisive elements for the demonstration of the existence of aid, the Commission should have opened a new adversarial procedure with the parties concerned [...]
10 The Commission claims that the first part of the first plea is unfounded. It points out that the annulment of the 2004 decision was based on a lack of motivation because [...] that decision did not explain in what way the aid in question could affect competition and trade between Member States. On the contrary, the Court failed to criticize the inquiry into the matter as carried out during the administrative procedure, nor did it identify any deficiency in this regard (C-587/12 P, paras 7-10, own translation from Italian).

The CJEU sides with the European Commission in the following terms:

11 It should be remembered that in the judgment of the Court in Italy and Wam v Commission as well as in the judgment in Commission v Italy and Wam, the investigation conducted by the Commission on the aid in question was not at all criticized.
12 [...] the General Court correctly pointed out that, according to settled case-law, the procedure for replacing an unlawful act that has been cancelled can be resumed at the point at which the illegality occurred, that the cancellation of a Union act does not necessarily affect the preparatory acts and, furthermore, that the annulment of an act that puts an end to an administrative proceeding which comprises several stages does not necessarily entail the annulment of the entire procedure prior to the adoption of  the contested measure for whatever reason, procedural or substantive, taken into account in the judgment of annulment.
13 [...] the Court also correctly pointed out that if, despite of the investigations that enable a comprehensive analysis of the compatibility of the aid, the Commission's analysis is found to be incomplete, and it involves the illegality of the decision, the procedure for replacing such a decision may be resumed at that point making a new analysis of the investigatory measures.
14 As regards the present case [...] the Court stated that the illegality of the 2004 decision [...] concerned the inadequate statement of reasons thereof. [...] the Court has, in fact, merely stated that this decision did not contain sufficient arguments that would allow the conclusion that they met all the conditions for the application of Article 107, paragraph 1, TFEU which was confirmed by the Court in its judgment in Commission v Italy and Wam. The illegality of the 2004 decision did not affect the proceedings before it. No argument leads to the conclusion that that procedure was, in itself, vitiated by any illegality.
15 As to the argument put forward by the applicant's claim that the Court failed to take account of the fact that the Commission has completely revisited the examination of all the evidence in the file and introduced new elements, it should be noted that this argument is not supported by anything which could demonstrate a misrepresentation of the facts relating to it by the Court.
16 As regards the applicant's claim that the Court, in the remainder of its reasoning, ignored any arguments to refute the conclusion set out in paragraph 50 of the judgment under appeal, the Court notes that, in paragraph 57 of that judgment, the Court stated that the circumstances relating to the strengthening of Wam's position and the release of resources were correctly assessed in the contested decision. The Court added in such a point that, in any case, it was not new factual circumstances, but considerations arising from the analysis of the Commission, based on elements with respect to which nothing allowed it to believe that they were not known at the time when the decision was taken in 2004. [...]
19 In these conditions [...] the General Court correctly concluded that the execution of the judgment of the Court in Italy and Wam v Commission and the judgment in Commission v Italy and Wam did not require the Commission to take on again the whole process provided for in Article 108 TFEU and that the Commission had erred, as a result of the same judgment, by not initiating a new formal investigation procedure.
20 The first part of the first plea is therefore unfounded (C-587/12 P, paras 11-20, own translation from Italian, emphasis added).

In my view, this is contradictory with Deutsche Post. There, the CJEU basically prevented the Commission from conducting a fresh (additional) assessment of the facts already contained in the file because, even if they were present from the beginning and known by the parties, because the initial decision adopted had exhausted the procedure and closed the investigation completely. Following the same line of reasoning, the Judgment in Wam should have been pointing in that direction by preventing the Commission from adopting a fresh 'theory of harm' on the basis of the facts already on file, as that would equally alter the legal position of the parties and would disregard the fact that the Commission had completely closed the investigation when adopting the initial (now quashed) incompatibility decision.

 

Effectively, Deutsche Post denied the Commission a second bite of the cherry, whereas Wam basically (potentially) allows for multiple bites. I find this inconsistency insatisfactory and, as I said already I would advocate for an approach where once a measure has been analysed and the Commission reaches a final decision, then the same measure should not be subjected to additional enquiries and no new findings of incompatibility should be acceptable.

 

In maybe more blunt terms, the Commission should have one shot (and only one) at each controversial State aid measure, in order to protect legal certainty and as an (implicit) requirement of the principle of good administration.

 

Overall, I would consider such a general principle a positive development in EU State aid law. It remains to be seen, however, whether there is true CJEU appetite for such a development.

Maybe not such a global appraisal of State aid after all: CJEU backtracks from a truly economic approach (C-124/10)

In an interesting recent paper, Pablo Ibáñez Colomo conducts a very detailed statistical overview of State Aid Litigation before EU Courts (2004–2012) [Journal of European Competition Law & Practice (2013) doi: 10.1093/jeclap/lpt057]. One of his relevant findings is that the 'private investor test' and its application by the European Commission was one of the most litigated areas of EU State Aid law in that period and that '[a]nnulments were more likely where the ‘private investor test’ was raised as a ground'.

 

In its Judgment of 24 October 2013 in Joined Cases C-214/12 P, C-215/12 P and C-223/12 P Land Burgenland v Commission, the Court of Justice of the EU has been confronted again with the test--this time in the mirror image of the ‘private vendor test'--and, on this occasion, has upheld the approach taken by the European Commission. In my opinion, there are several passages of the Judgment that bear stressing, particularly because the CJEU is backtracking from a much more economically oriented assessment of State aid that was (at least) suggested in Commission v EDF (C-124/10 P).

 

The case involved the existence of State aid in the privatisation of HYPO Bank Burgenland AG, where the relevant Austrian authorities decided to sell the bank to GRAWE despite the fact that the price it offered (EUR 100.3 million) was significantly lower than the price offered by a competing Austro-Ukrainian consortium (EUR 155 million). As the CJEU explains:

The decision was based, in particular, on a [...] recommendation by HSBC  [which] essentially states that, although on the basis of the proposed purchase price the decision should be made in favour of the Consortium, it was recommended that BB be sold to GRAWE, in view of the other selection criteria, namely the reliability of the purchase price payment, the continued operation of BB while avoiding the use of Ausfallhaftung [ie the Austrian performance guarantee system for public credit institutions], capital increases and transaction security (C-214/12 P at para 9).

Not surprisngly, the Consortium challenged the decision claiming that the Republic of Austria had infringed State aid rules during the privatisation of BB and stressing that, amongst other irregularities, the tender procedure had been unfair, untransparent and discriminatory towards it--which resulted in the sale of BB not to the highest bidder, namely the Consortium, but to GRAWE.

The European Commission found that Austria had indeed granted illegal State aid to GRAWE in the privatisation Bank Burgenland because it failed to meet the requirements of the 'private investor test'. In the Commission's view, a private seller would only reject the highest bid in two circumstances: either where it is obvious that the sale to the highest bidder is not realisable, or where consideration of factors other than the price is justified, subject to the proviso that only those factors which would have been taken into consideration by a private vendor are taken into account.

The key aspect then becomes whether the (likely) avoidance of the use of the Ausfallhaftung that would follow the sale to GRAWE rather than to the Consortium was a valid justification under the second scenario (ie whether it was a risk which avoidance justified the transaction). The Commission clearly considered that according the private investor test excludes risks stemming from potential liability to make payment under a guarantee which has to be classified as State aid, such as Ausfallhaftung. The reasoning was similar to the one followed (or, at least, the one I identified) in Commission v EDF, where the CJEU rejected a similarly formalistic approach followed by the Commission.

 

In that case, the CJEU found that

in view of the objectives underlying [Article 107(1) TFEU] and the private investor test, an economic advantage must – even where it has been granted through fiscal means – be assessed inter alia in the light of the private investor test, if, on conclusion of the global assessment that may be required, it appears that, notwithstanding the fact that the means used were instruments of State power, the Member State concerned conferred that advantage in its capacity as shareholder of the undertaking belonging to it (C-124/10 P, para 92, emphasis added).

 

In essence, this supported the approach followed by the General Court, which had ruled that

the purpose of the private investor test is to establish whether, despite the fact that the State has at its disposal means which are not available to the private investor, the private investor would, in the same circumstances, have taken a comparable investment decision. It follows that neither the nature of the claim, nor the fact that a private investor cannot hold a tax claim, is of any relevance (C-124/10 P, at para. 37, emphasis added).

In that regard, it would seem that in the Burgenland case, the GC and the CJEU should also reject the Commission's argument and, consequently, allow the selling authorities to integrate the total potential costs of the use of the Ausfallhaftung as a valid reduction of the nominal price offered by the Consortium and, dependeing on the result of such an assessment, potentially award the contract to GRAWE, as they effectively did. It would have been expected, as the Austrian authorities claimed, that the nature and origin of potential liabilities would be considered irrelevant and that a gloabl (economic) appraisal of the offers received for the Burgenland Bank would have been considered in line with EU law.

 

However, the CJEU reexamines the interpretation of the 'private investor (rectius, vendor) test' to take into account this issue and rules in the following terms:

46 In their first argument, the Province of Burgenland, the Republic of Austria and GRAWE claim, in essence, that the General Court failed to appreciate, in the light of Ausfallhaftung’s characteristics, both the role of the Province of Burgenland as owner and shareholder of BB and, therefore, the private investor test, such as it emerges from Spain v Commission and Germany v Commission. […]

48 the General Court found, in line with that case-law that, when applying the private investor test, it must be determined whether the measures in question are those which such an investor, who counts on making a profit in the short or long term, could have granted.

49 Finally, […] the General Court found, in its assessment of the facts which cannot be appealed, that Ausfallhaftung was not entered into on normal market conditions, given its characteristics.

50 In those circumstances, the General Court rightly concluded […] that Ausfallhaftung could not be taken into account when assessing the conduct of the Austrian authorities in the light of the private vendor test (sic) and that, consequently, the Commission could not be criticised for having rejected Ausfallhaftung’s relevance when evaluating the offers submitted by the Consortium and by GRAWE.

51 Further, as regards the impact of Commission v EDF, it must be pointed out that that judgment was principally concerned with whether the private investor test was applicable in the circumstances of that case, which was rejected by the Commission in the decision at issue in that case, and not how that test was applied in the particular case (see Commission v EDF judgment, paragraph 75). However, in the present cases, it is undisputed that the Commission applied the private vendor test and the Province of Burgenland, the Republic of Austria and GRAWE are in actual fact challenging the General Court’s approval of the manner in which the Commission applied that test.

52 As regards the application of that test, Commission v EDF confirmed the case-law which emerges, in particular, from Spain v Commission and Germany v Commission, according to which, in order to assess whether the same measure would have been adopted in normal market conditions by a private vendor in a situation as close as possible to that of the State, only the benefits and obligations linked to the situation of the State as shareholder – to the exclusion of those linked to its situation as a public authority – are to be taken into account (see, to that effect, Commission v EDF, paragraph 79).

53 In Commission v EDF judgment, the Court further made it clear that, when carrying out that assessment, the manner in which the advantage is provided and the nature of the manner by which the State intervenes are irrelevant where the Member State concerned conferred that advantage in its capacity as shareholder of the undertaking concerned (see Commission v EDF, paragraphs 91 and 92).

54 […] The General Court examined whether Ausfallhaftung had to be taken into account when implementing the private vendor test and found that a private vendor would not have entered into such a guarantee (sic).

55 The Province of Burgenland, the Republic of Austria and GRAWE do not put forward any argument liable to put that finding into doubt, but claim themselves that Ausfallhaftung is a State aid, as the Commission had moreover found in Decision C(2003) 1329 final.

56 In those circumstances, and since, by granting aid, a Member State pursues, by definition, objectives other than that of making a profit from the resources granted to an undertaking belonging to it, it must be held that those resources are, in principle, granted by the State exercising its prerogatives as a public authority.

57 In so far as the Province of Burgenland, the Republic of Austria claim that, through Ausfallhaftung, the Province of Burgenland was none the less seeking to make profit or, at the very least, attempting to do so in addition to its other objectives, it must be recalled that, if a Member State relies on a test such as the private vendor test, it must, where there is doubt, establish unequivocally and on the basis of objective and verifiable evidence that the measure implemented is to be ascribed to the State acting as shareholder (see, to that effect, Commission v EDF, paragraph 82).

58 That evidence must show clearly that, before or at the same time as conferring the economic advantage, the Member State concerned took the decision to make an investment, by means of the measure actually implemented, in the public undertaking (Commission v EDF, paragraph 84).

59 In that regard, it may be necessary to produce evidence showing that the decision is based on economic evaluations comparable to those which, in the circumstances, a rational private vendor in a situation as close as possible to that of the Member State would have had carried out, before making the investment, in order to determine its future profitability (see, to that effect, Commission v EDF, paragraph 84).

60 It is only in cases where the Member State concerned provides the Commission with the necessary evidence that the onus is on the Commission to carry out a global assessment, taking into account – in addition to the evidence provided by that Member State – all other relevant evidence enabling it to determine whether the Member State took the measure in question in its capacity as shareholder or as a public authority (see, to that effect, Commission v EDF, paragraph 86).

61 However, neither during the administrative procedure nor before the General Court did the Province of Burgenland, the Republic of Austria or GRAWE put forward any evidence showing that the introduction or retention of Ausfallhaftung was based on economic evaluations carried out by the Province of Burgenland for the purposes of establishing its profitability. It follows that the Commission was not required to undertake such a global assessment as regards Ausfallhaftung and that the Burgenland and GRAWE judgments were not vitiated by any errors in that regard (C-214/12 P at paras 46-61, emphasis added).

 

 

I am puzzled by the findings of the CJEU. If it rightly held in Commission v EDF that the fiscal nature of the credit converted into capital was irrelevant for the assessment of the transaction as a whole, why is it now relevant that the potential liability incurred in the use of the Ausfallhaftung by the disappointed Consortium derives from a public law system? Surely, if it was not questioned that 'the General Court [rightly] rejected the Commission’s argument that the private investor test could not be applied to the conversion into capital of a tax claim, since a private investor could never hold a tax claim against an undertaking, but only a civil or commercial claim' (C-124/10 P, at paras 37 and 95), it should not be now relevant that a private investor could have not entered into a guarantee scheme such as the Ausfallhaftung (C-214/12 P at para 54).

 

Moreover, an economic assessment should be carried out regardless of the subjective intentions of the State authority (cfr. C-214/12 P at para 59) and, in any case, it was cristal clear in the Burgenland case that an (independent) economic evaluation was carried out by (HSBC), which clearly indicated that, all factors considered, the rational decision was to enter into the transaction with the lowest bidder. Why is the CJEU now not willing to assess the economic transaction as a whole is something I cannot come to grips with.

 

I guess that this will be an area that, as Ibáñez Colomo's study shows, will continue to occupy a significant amount of cases and, possibly, remain one of the obscure areas of State aid litigation for quite some time.

Neutrality of ownership is not unconditional: CJEU sets red lines for privatisation prohibitions (C-105/12 to C-107/12)

In its Judgment of 22 October 2013 in Joined Cases C-105/12 to C-107/12 Essent and Others, the Court of Justice of the EU has explored the boundaries of Article 345 TFEU--which has, so far, remained (and still is) an obscure provision of the Treaties [see B Akkermans & E Ramaekers, 'Article 345 TFEU (ex Article 295 EC), Its Meanings and Interpretations' (2010) European Law Journal 16(3): 292-314].

 

In Essent, the CJEU was concerned with the compatibility with EU law of an absolute privatisation ban. More specifically, it had to analyse a Dutch rule whereby shares in companies that operate distribution networks of electricity and gas can be transferred only within the circle of public authorities, ie cannot be privatised (for a comment, see here).

 

Advocate General Jaaskinen had considered the absolute ban on privatisation compatible with both Article 345 TFEU and Article 63 TFEU on free movement of capital (see his Opinion, not available in English, here). The CJEU has reached the same conclusions.

 

In my view, one of the most interesting legal points of the Essent Judgment is that Article 345 TFEU does not write Member States a blank check when they regulate their property systems or, put othewise, that the principle of neutrality of ownership enshrined in that provision is not unconditional.

 

Hence, the reasoning of the CJEU should be seen as an exercise to draw some red lines that Member States cannot overstep when designing their property systems and that, fundamentally, boil down to full compliance with the rules on free movement of capital.

29 Article 345 TFEU is an expression of the principle of the neutrality of the Treaties in relation to the rules in Member States governing the system of property ownership.
30 In that regard, it is apparent from the Court’s case-law that the Treaties do not preclude, as a general rule, either the nationalisation of undertakings (see, to that effect, Case 6/64 Costa [1964] ECR 585, at 598) or their privatisation (see, to that effect, Case C‑244/11 Commission v Greece [2012] ECR I‑0000, paragraph 17).
31 It follows that Member States may legitimately pursue an objective of establishing or maintaining a body of rules relating to the public ownership of certain undertakings.
32 […] the prohibition of privatisation, within the meaning of the national legislation at issue in the main proceedings, allows, in essence, the transfer of shares held in a distribution system operator only to the authorities and to legal persons owned, directly or indirectly, by those authorities, since any transfer which has the result that the shares become the property of persons other than such authorities and legal persons is prohibited.
33 It follows that the prohibition of privatisation precludes ownership by any private individual of shares in an electricity or gas distribution system operator active in the Netherlands. Its objective is therefore to maintain a body of rules relating to public ownership in respect of those operators.
34 Such a prohibition falls within the scope of Article 345 TFEU. […]36 However, Article 345 TFEU does not mean that rules governing the system of property ownership current in the Member States are not subject to the fundamental rules of the FEU Treaty, which rules include, inter alia, the prohibition of discrimination, freedom of establishment and the free movement of capital (see, to that effect, Case 182/83 Fearon [1984] ECR 3677, paragraph 7; Case C‑302/97 Konle [1999] ECR I‑3099, paragraph 38; Case C‑452/01 Ospelt and Schlössle Weissenberg [2003] ECR I‑9743, paragraph 24; Case C‑171/08 Commission v Portugal [2010] ECR I‑6817, paragraph 64; Case C‑271/09 Commission v Poland [2011] ECR I‑0000, paragraph 44; and Commission v Greece, paragraph 16).
37 Consequently, the fact that the Kingdom of the Netherlands has established, in the sector of electricity or gas distribution system operators active in its territory, a body of rules relating to public ownership covered by Article 345 TFEU does not mean that that Member State is free to disregard, in that sector, the rules relating to the free movement of capital (see, by analogy, Commission v Poland, paragraph 44 and the case‑law cited).
38 Accordingly, the prohibition of privatisation falls within the scope of Article 63 TFEU and must be examined in the light of that article […] (C-105/12 ti C-107/12 at paras 29-38, emphasis added).

This finding of the CJEU effectively subjects the principle of neutrality of ownership to a proportionality test and, generally, seems to restrict its scope--actually, it seems to me that the Essent Judgment makes Article 345 TFEU less than neutral in that it imposes a justification burden on the ownership systems designed at Member State level.

This may be an opening door for a stricter control of ownership rules in the Member States and, once more, for an implicit redistribution of competences between the EU and the Member States [see the interesting discussion by F Losada Fraga et al, 'Property and European Integration: Dimensions of Article 345 TFEU' (2012) Helsinki Legal Studies Research Paper No. 17]. However, more clarification will be necessary, particularly in cases where the public interest justifications for restrictions of (private) ownership are less clear cut than in the Essent case and that, consequently, will be likely to result in an effective restriction of domestic rules on (public) ownership.

CJEU flexibilises treatment of formally non-compliant bids in public procurement (C-336/12)

In its Judgment of 10 October 2013 in case C-336/12 Manova, the Court of Justice of the EU (CJEU) has  followed its own approach in Slovensko and created some room for the flexible interpretation of the rules on formal compliance of bids submitted in public procurement procedures.

 

In Manova, the contracting authority had requested some of the tenderers to provide financial statements that had not been included in their bids after the deadline for their submission had ellapsed. Given that this decision was challenged on the grounds of a potential breach of the principle of equal treatment, the referring court decided to request a preliminary ruling from the CJEU, which was asked "whether the principle of equal treatment is to be interpreted as precluding a contracting authority from asking a candidate, after the deadline for applying to take part in a tendering procedure, to provide documents describing that candidate’s situation – such as a copy of its published balance sheet – which were called for in the contract notice, but were not included with that candidate’s application".

 

In rather clear terms (although some caveats may have been dispensed with, in my opinion), the CJEU ruled that:

the principle of equal treatment must be interpreted as not precluding a contracting authority from asking a candidate, after the deadline for applying to take part in a tendering procedure, to provide documents describing that candidate’s situation – such as a copy of its published balance sheet – which can be objectively shown to pre-date that deadline, so long as it was not expressly laid down in the contract documents that, unless such documents were provided, the application would be rejected. That request must not unduly favour or disadvantage the candidate or candidates to which it is addressed (C-336/12 at para 42).

In my view, the Manova Judgment must be welcome, both for its functional approach and for its alignment with domestic practices in a significant number of EU Member States--as discussed in Sánchez Graells, A, "Rejection of Abnormally Low and Non-Compliant Tenders in EU Public Procurement: A Comparative View on Selected Jurisdictions", in S Treumer and M Comba (eds), Award of Public Contracts under EU Procurement Law, vol. 5 European Procurement Law Series, (Copenhagen, DJØF, 2013) 267-302. This seems a good step in the direction of avoiding that overly strict formal requirements get in the way of actual good public procurement practices.

AG Cruz Villalon on access to leniency applications: A stringent test. Really? (C-365/12)

In his Opinion of 3 October 2013 in case C-365/12 EnBW Energie, Advocate General Cruz Villalon has proposed a holistic interpretation of the regulatory schemes relating to access to documents of the institutions and, more specifically, of access to the European Commission's files in the context of its leniency programme. In my view, the holistic approach advocated for still leaves some important issues unresolved and, consequently, the Judgment of the CJEU in this case will be highly relevant.

 

According to AG Cruz Villalon, when access to the file in cartel investigations is concerned,

63. In short, the presumption [that access should be refused] must operate in relation to documents the disclosure of which is either ruled out or – in the case of Regulation No 1/2003, as compared with Regulation No 1049/2001– possible only on certain conditions. In other words, the presumption should be fully effective vis-à-vis parties who, in accordance with Regulation No 1/2003 and Regulation No 773/2004, have no right, in principle, to access the documents in cartel proceedings, as in the case of EnBW here; and this must also be the case vis-à-vis parties who have only a limited right of access or a right which is recognised solely for the purposes of safeguarding the right of defence.

64. That conclusion must carry a qualification, however. The abovementioned presumption ‘does not exclude the possibility of demonstrating that a given document, of which disclosure is sought, is not covered by that presumption or that there is a higher public interest justifying the disclosure of that document under Article 4(2) of Regulation No 1049/2001 (Commission v Technische Glaswerke Ilmenau, paragraph 62)’. Consequently, the fact that Regulation No 1/2003 does not provide for access by persons who are not parties to the proceedings means only that, in the event that such persons request access, their requests must be dealt with in accordance with Regulation No 1049/2001 (as the general legislation in the area of transparency), interpreted in the light of the general presumption that disclosure of the documents may undermine the purpose of the proceedings under Regulation No 1/2003. This presumption does not in any way rule out access pursuant to Regulation No 1049/2001: it merely imposes more stringent conditions on the access granted under that regulation (emphasis added).

In his Opinion, AG Cruz Villalon takes a very different approach, but basically supports a stringent test that would lead to the same restrictive outcome supported by AG Jaaskinen some months ago in C-536/11 Donau Chemie and others, where he considered that: 

in my opinion a legislative rule would be more appropriate that provided absolute protection for the participants in a leniency programme, but which required the interests of other participants to a restrictive practice to be balanced against the interests of the alleged victims. [...] Furthermore, in my view and except for undertakings benefiting from leniency (sic!), participation in and of itself in an unlawful restriction on competition does not constitute a business secret that merits protection by EU law (para 64, emphasis added).

It is worth stressing that such a radical approach (which I criticised) was rejected by the CJEU in the final Donau Chemie Judgment:

as regards the public interest of having effective leniency programmes [...] it should be observed that, given the importance of actions for damages brought before national courts in ensuring the maintenance of effective competition in the European Union (see Courage and Crehan, paragraph 27), the argument that there is a risk that access to evidence contained in a file in competition proceedings which is necessary as a basis for those actions may undermine the effectiveness of a leniency programme in which those documents were disclosed to the competent competition authority cannot justify a refusal to grant access to that evidence (para 46, emphasis added).

AG Cruz Villalon is aware of the position of the CJEU in Donau Chemie and, consequently (but implicilty), seeks to clarify his proposal for a stringent test on access to the file (and, more specifically, to leniency applications) by stressing that:

the effectiveness of leniency programmes can be safeguarded only (sic!) if it is guaranteed that, as a general rule, the documentation provided will be used by the Commission alone. This would, of course, be the ultimate safeguard. However, other safeguards should also be considered that are less extensive but still attractive for those wanting to take advantage of those programmes. In the final analysis, the rationale underlying leniency programmes is a calculation as to the extent of the harm that might arise from an infringement of competition law. Considered in those terms, to guarantee that the information provided to the Commission can be passed on to third parties only if they can adequately prove that they need it in order to bring an action for damages could constitute a sufficient safeguard, particularly considering that the alternative might be a penalty higher than that which might ensue were the action for damages to be successful. Admittedly, it is possible that a safeguard of that kind might result in fewer parties deciding to take advantage of leniency programmes. However, the objective of maximum effectiveness for that mechanism should not be regarded as justification for a complete sacrifice of the rights of those concerned to be compensated and, more generally, for an impairment of their rights to an effective remedy under Article 47 of the Charter of Fundamental Rights of the European Union (para 78, emphasis added).

In my opinion, the carve out that AG Cruz Villalon creates against his own proposal for a general presumption of non-disclosure (which waiver should be subjected to a stringent test) is not terribly consistent in logical terms, but seeks to accomodate the Donau Chemie Judgment. Nonetheless, the safeguard/test is not clearly presented and the AG's Opinion in EnBW Energie does not really clarify this (increasingly?) grey area of EU competition law. In fact, in view of his concern with the protection of the commercial interests of leniency applicants, it seems that he is actually de facto advocating for the strongest (absolute) safeguard presented above (which, in those terms, would basically amount to the absolute protection advocated for by Jaaskinen and rejected by the CJEU in Donau Chemie).

 

Indeed, AG Cruz Villalon weakly criticises the finding of the GC in paras 147-148 of the appealed EnBW Energie Judgment (‘the interests of the undertakings that had participated in the cartel … in non-disclosure of the documents requested cannot be regarded as commercial interests in the true sense of those words. Indeed, [...] the interest which those companies might have in non-disclosure of the documents requested seems to reside not in a concern to maintain their competitive position on the [...] market [...] but, instead, in a desire to avoid actions for damages being brought against them before the national courts’. In any event, that would not constitute ‘an interest deserving of protection, having regard, in particular, to the fact that any individual has the right to claim damages for loss caused to him by conduct which is liable to restrict or distort competition’), by indicating that, in his opinion, 

the possibility that disclosure of the information provided by the undertakings in question might objectively undermine their commercial interests cannot be ruled out. The fact that the information was provided voluntarily and with a view to avoiding or minimising a penalty is, in my opinion, no basis for regarding the commercial interests involved as unworthy of protection. Otherwise, undertakings that have cooperated with the Commission would suffer a further penalty, in addition to whatever penalty is ultimately considered appropriate, in the form of the damage caused to their commercial interests (para 93).

Therefore, in my view, AG Cruz Villalon's EnBW Energie Opinion (because of its different technical approach) does put some pressure on the CJEU to finally and explicitly take a position on the compatibility with EU law of the protection of leniency applications that the European Commission and the National Competition Authorities within the European Competition Network are pursuing (see Resolution of 23 May 2012 on the protection of leniency material in the context of civil damages actions)--beyond the general remarks made in Donau Chemie.

 

Indeed, the CJEU failed to close that door in Donau Chemie by indicating that:

47 By contrast, the fact that such a refusal is liable to prevent those actions from being brought, by giving the undertakings concerned, who may have already benefited from immunity, at the very least partial, from pecuniary penalties, an opportunity also to circumvent their obligation to compensate for the harm resulting from the infringement of Article 101 TFEU, to the detriment of the injured parties, requires that refusal to be based on overriding reasons relating to the protection of the interest relied on and applicable to each document to which access is refused.

48 It is only if there is a risk that a given document may actually undermine the public interest relating to the effectiveness of the national leniency programme that non-disclosure of that document may be justified.

Hence, the debate is alive and kicking (on the CJEU's door) and a more definite answer is needed. Personally, I would support a very clear indication by the CJEU that leniency applications do not merit special treatment and, consequently, need to be disclosed to (credible) potential damages claimants and always under the supervision and within the context of judicial procedures. Otherwise, the leniency policy will kill damages actions and, even if it is very hard to trade-off the advantages and disadvantages of both policies, it seems clear that allowing for private redress and effective compensation is a requirement under EU law (as the CJEU has been so keen to consistently emphasise since Courage).

 

In the end, I would submit that the CJEU should bring his reasoning a step beyond and determine that "giving the undertakings concerned, who may have already benefited from immunity, at the very least partial, from pecuniary penalties, an opportunity also to circumvent their obligation to compensate for the harm resulting from the infringement of Article 101 TFEU, to the detriment of the injured parties" goes beyond the scope of the leniency programme--which advantages need to be contained within the sphere of the administrative effects (or, put otherwise, within the sphere of public enforcement).

 

Otherwise, the Commission and the NCAs will continue in their schizophrenic quest against cartels, where they try to have their cake (numerous leniency applications leading to resounding fines for the rest of the cartelists) and eat it too [by fostering a system for effective (collective) private reddress that, simply, cannot coexist peacefully with (or at least, cannot blossom under) full-blown leniency protection].

CJEU 'warns' against tax breaks based on employment goals: State aid rules (may) oppose them (C-6/12)

In its Judgment of 18 July 2013 in case C-6/12 P Oy, the Court of Justice of the EU (CJEU) assessed the compatibility with EU State aid rules of the Finnish regime of deduction of tax losses by undertakings subjected to corporate control changes (see a Finnish comment here). 

In my view, the most interesting part of the CJEU Judgment in the case lies not with the "boilerplate" analysis of the Finnish tax law provisions but, remarkably, with the not so concealed warning it has sent out to Member States that may be tempted to create 'too soft' tax regimes for companies which activities may have a "particular impact on employment".

Basically, Finnish tax rules allow companies to carry their losses forward up to 10 years after incurring them for the purposes of compensating their benefits and diminishing their tax burden. However, in order to prevent strategic acquisitions of 'bags of losses' within the shields of inactive companies, the Finnish tax code establishes a special regime in case of changes of corporate control. According to the relevant provisions, "losses sustained by a company are not deductible if, during the year in which they arise or thereafter, more than half of the company’s shares have changed ownership otherwise than by way of inheritance or will, or more than half of its members are replaced." However, "the competent tax office may, for special reasons, where it is necessary for the continuation of the activities of the company, authorise the deduction of losses when such an application is made" (emphasis added). 

By way of a guidance letter, the Finnish Tax Directorate interpreted the concept of "special reasons" and considered that, inter alia, could include the fact that the company requesting permission to carry fiscal losses forward despite a change of corporate control had "particular impact on employment". Indirectly, this raised the issue whether the granting of such an authorisation based on (non-strictly) tax reasons would meet the selectivity requirement of Article 107(1) TFEU and, consequently, could be challenged under the EU State aid rules.

In a very clear manner (despite the non-binding general tone of the Judgment, where the CJEU claims not to have sufficient information to reach a final position), the CJEU has indicated that:

26 […] the application of an authorisation system which enables losses to be carried forward to later tax years, such as that in question in the present case, cannot, in principle, be considered to be selective if the competent authorities have, when deciding on an application for authorisation, only a degree of latitude limited by objective criteria which are not unrelated to the tax system established by the legislation in question, such as the objective of avoiding trade in losses.

27 On the other hand, if the competent authorities have a broad discretion to determine the beneficiaries or the conditions under which the financial assistance is provided on the basis of criteria unrelated to the tax system, such as maintaining employment, the exercise of that discretion must then be regarded as favouring ‘certain undertakings or the production of certain goods’ in comparison with others which, in the light of the objective pursued, are in a comparable factual and legal situation (see, to that effect, C‑107/09 P Commission and Spain v Government of Gibraltar and United Kingdom [2011] ECR I‑0000,  paragraph 75). […]

30 […] if the competent authorities were to be able to determine the beneficiaries of the deduction of losses on the basis of criteria unrelated to the tax system, such as maintaining employment, such an exercise of that power should then be regarded as favouring ‘certain undertakings or the production of certain goods’ in comparison with others which, in the light of the objective pursued, are in a comparable factual and legal situation (C-6/12 at paras 26 to 30, emphasis added).

In my view, the CJEU has gone out of its way in this case (where it could have simply declined to provide an answer on the basis of the lack of information submitted by the referring court) with the aim of sending out a clear message to the governments of all Member States: if they intend to use (selective) tax measures to prevent negative impacts on employment, they need to obtain approval by the European Commission first.

This is not a revolution and may even have a second order of importance but, in my view, the CJEU has clearly backed the European Commission's efforts to control Member States' measures to (continue trying to) react to the economic crisis and has clearly indicated that corporate taxation cannot be used as a tool for these purposes. We shall see if the message reaches the intended ears...

AG Jääskinen revisits PreussenElektra and minimises implications of Doux Elevages (C-262/12)

As a continuation of the Judgment of the Court of Justice of the EU of 30 May 2013 in case C-677/11 Doux Élevages and Coopérative agricole UKL-AREE, where the CJEU (re)analysed the concept of 'State aid' and stressed that aid cannot exist if the economic advantage under analysis is not funded by 'State resources' and there is no 'imputability to the State' (commented here); in his Opinion of 11 July 2013 in case C-262/12 Vent De Colère and Others, Advocate General Jääskinen has assessed a French scheme of support to electric distribution companies and revisited the well-known PreussenElektra criteria.

In his analysis, AG Jääskinen uses the two main criteria of 'imputability' and existence of 'State resources' in order to determine whether some contributions paid by final customers of electricity--which are then used to compensate for the costs of the mandatory purchase of wind energy by electricity distributors at above the market prices--amount to State aid.

Very briefly, under the controverted scheme, producers of wind energy benefit from an obligation of mandatory purchase of their electricity by energy distributors at prices above the market. Distribution companies can then claim full compensation for those additional costs (which are classed as costs derived from public service obligations) from CDC (Caisse des Dépôts group, which is a "public group serving general interest and economic development"). CDC's compensation is ultimately financed by the final consumers of electricity, who pay that compensation as part of their electricity bill.

According to AG Jääskinen, the scheme constitutes State aid because there is both State imputability and the measure is financed by State resources. As to the first element, the AG considers that the fact the contribution to be paid by consumers is directly determined in a law implies that the adoption of such a measure is imputable to the public powers of the French State (para 32 of hi Opinion). 

It is interesting to stress that the AG distinguishes this case from the very recent Doux Elevages Judgment by stressing that the intervention of the State in this case was not of a 'merely instrumental' nature, but that the French State took full ownership of the compensation scheme for producers of wind electricity (para 40).

As to the more controversial issue of the consumer contributions amounting to the existence of 'State resources', the AG stresses that 'the fact that these resources constantly remain under public control and, therefore, are available to the competent national authorities, suffices to qualify them as State funds to finance the measure, which then falls within the scope of Article 107(1) TFEU' (para 34, own translation from Spanish). AG Jääskinen confirms this positive finding in view of the control that the French State exercises over CDC, the status of CDC as the organism that intervenes in the transmission of the funds between consumers and distributors of energy, and the nature of the controverted funds.

In my view, it is worth noting that AG Jääskinen advocates for a rather streamlined test of 'origin/absorption' of private funds once they are managed by a public entity by clearly submitting that he does 'not agree with the general statement that the public nature of an organism does not entail that the resources available to it  are to be regarded as State funds' (para 46, own translation from Spanish). I think that this is an appropriate approach that would overcome a formalistic assessment of the avenues that financial support follows and, in the end, would broaden the definition of State aid under a more functional approach.

Also, and once more, AG Jääskinen distinguishes this case from the Doux Elevages Judgment by stressing the fact that all consumers are indiscriminately affected by the compensation scheme (regardless of their use of wind energy or not) and, consequently, the scheme is of a (quasi)fiscal nature (at least, this is my understading of his considerations in paras 50-54 of his Opinion). I think that this should also be welcome, as such an approach would contribute to limit the possibilities for States to effectively create (disguised) aid schemes by means of (pseudo)fiscal interventions.

In general, in my opinion, AG Jääskinen's Opinion in Vent de Colere should be welcome, not least because of his clear and well-thought proposals to distinguish (and restrict) the implications of the Doux Elevages Judgment. 

Let's hope that the CJEU follows him and also adopts a clear position towards limiting the potentially far-fetched implications of Doux Elevages.

CJEU protects right to challenge public procurement decisions by non-compliant tenderers (C-100/12)

In its Judgment of 4 July 2013 in case C-100/12 Fastweb, the Court of Justice of the European Union (CJEU) has strengthened the effectiveness of the public procurement remedies system by protecting the right to challenge (illegal) award decisions by tenderers that do not comply with all the (technical) requirements imposed by the tender documentation themselves.

In the case at hand, a disappointed tenderer challenged the award decision on the basis that none of the two awardees in a framework agreement complied with the technical specifications set by the contracting authority. The awardees of the contract intervened in the procedure and raised a counterclaim stating that the challenger did not comply with the technical specifications (either). Under Italian law, the counterclaim had to be analysed first and, if successful, would bar the challenge on the basis of a lack of locus standi of the disappointed tenderer (who could not have been awarded the contract anyway and, consequently, would be prevented from challenging the outcome of the procedure).

The CJEU found such an interpretation of the rules on active standing contrary to the EU public procurement remedies directives (as amended by dir 2007/66), inasmuch as 'the aim of [those directives] is to ensure that decisions made by contracting authorities in breach of European Union law can be effectively reviewed' (C-100/12 at para 25). Following a functional approach that deserves praise, the CJEU found that:

a counterclaim filed by the successful tenderer cannot bring about the dismissal of an action for review brought by a tenderer where the validity of the bid submitted by each of the operators is challenged in the course of the same proceedings and on identical grounds. In such a situation, each competitor can claim a legitimate interest in the exclusion of the bid submitted by the other, which may lead to a finding that the contracting authority is unable to select a lawful bid (C-100/12 at para 33).

Consequently, the CJEU has determined that the counterclaim concerning the locus standi of a tenderer that should have been excluded (or whose tender should have been rejected) cannot preempt the analysis of the legality of the award decision adopted by the contracting authority. 

By (implicitly) adopting such a broad interpretation of the concept of 'any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement' [art 1(3) dir 2007/66], the CJEU has increased the chances of attaining effective and substantive review of the award decisions adopted by contracting authorities, regardless of the specific procedural rules within each of the EU Member States (as mandated by the principle of effectiveness of EU law) and seems to point clearly towards a principle or criterion of 'favor revisionis', so that review bodies and courts tend to assess the material conditions of award decisions, despite the presence of apparent procedural difficulties to carry out such an assessment. 

In my opinion, this is a favourable development of EU public procurement law and one that is conducive to ensuring an absence (or correction at review stage) of distortions of competition. As argued elsewhere [A Sanchez Graells, Public Procurement and the EU Competition Rules (Oxford, Hart, 2011) pp. 353-355], my view is coincidental with the approach adopted by the CJEU in that 

the best reading of the standing requirements imposed by Directive 2007/66 is that Member States have to adopt a broad approach to the setting of detailed rules regulating active standing to access bid protests and review procedures, and that they have to do so attending both to the criterion of participation in the tender, and to the criterion of the effects actually or potentially generated by the alleged infringement—so that bid protest and review procedures are open to any party that has taken part in the tender or that can otherwise prove that it has been harmed or risks being harmed as a result of the alleged infringement, regardless of its actual participation (or lack of it) in the specific tender that gave rise to it.

CJEU gives blow to competition lawyers: Your (legal) opinion is worthless (C-681/11)

In its Judgment of 18 June 2013 in case C-681/11 Schenker and Others, the Court of Justice of the European Union has settled the difficult issue of whether an error with regard to the lawfulness of market conduct is unobjectionable in the case where the undertaking acts in accordance with advice given by a legal adviser experienced in matters of competition law and the erroneous nature of the advice was neither obvious nor capable of being identified through the scrutiny which the undertaking could be expected to exercise.

The CJEU has gone beyond the very strict test proposed by Advocate General Kokott (see comments here) and has very bluntly determined that

38 […] the fact that the undertaking concerned has characterised wrongly in law its conduct upon which the finding of the infringement is based cannot have the effect of exempting it from imposition of a fine in so far as it could not be unaware of the anti-competitive nature of that conduct. 
40 […] the national competition authorities may exceptionally decide not to impose a fine although an undertaking has infringed Article 101 TFEU intentionally or negligently. That may in particular be the case where a general principle of European Union law, such as the principle of the protection of legitimate expectations, precludes imposition of a fine. 
41 However, a person may not plead breach of the principle of the protection of legitimate expectations unless he has been given precise assurances by the competent authority (see Case C‑221/09 AJD Tuna [2011] ECR I‑1655, paragraph 72, and Case C‑545/11 Agrargenossenschaft Neuzelle [2013] ECR I‑0000, paragraph 25). It follows that legal advice given by a lawyer cannot, in any event, form the basis of a legitimate expectation on the part of an undertaking that its conduct does not infringe Article 101 TFEU or will not give rise to the imposition of a fine. 
43 Consequently, the answer to the first question is that Article 101 TFEU must be interpreted as meaning that an undertaking which has infringed that provision may not escape imposition of a fine where the infringement has resulted from that undertaking erring as to the lawfulness of its conduct on account of the terms of legal advice given by a lawyer or of the terms of a decision of a national competition authority (C-681/11at paras 38 to 43, emphasis added).

As I said already, but particularly as a result of the very blunt approach to this matter by the CJUE, in my view, in practice, this approach may generate the result that (very expensive, specialised) legal advice in EU Competition law matters is not worth the paper it is written on--and, consequently, undertakings may not even bother seeking (and paying for) it. 

 
Moreover, the level of pressure under which competition specialists will now operate may make it impossible for them to effectively cover (ie insure) their potential liability at reasonable costs--thereby having a negative effect on the availability and affordability of good quality legal advice in this field.

I suggested that the CJEU should depart from the Opinion of AG Kokott by adopting a more flexible approach and setting a less demanding standard for this defence (and,consequently, creating some room for an effective 'serious legal advice' defence).

In my view, that would have been preferable because resort to 'sound legal advice' can be coupled with the requirements connected with the implementation of effective competition compliance programs for the purposes of giving undertakings a chance of ever succeeding in proving lack of intention or unobjectionable conduct. In that regard, there seems to be some need for further consistent developments of the rules applicable in the 'self-assessment' paradigm created by Regulation 1/2003. 

However, today's Judgment provides anything but consistency in that regard and gives a strong blow to everyone involved in legal advice in competition law matters. It seems unclear to me that the net outcome will be more (investment in) compliance with EU Competition Law.

#CJEU disagrees with AG Jaaskinen on access to #leniency files for damages claims purposes (C-536/11)

In its Judgment of 6 June 2013 in case C-536/11 Donau Chemie and Others, the Court of Justice of the European Union (CJEU) has disagreed with the Opinion of Advocate General Jääskinen on the need for an (almost) absolute protection of leniency applications from disclosure to third parties interested in claiming damages (which was criticised here). 

In my opinion, this development should be most welcome and puts pressure on the European Commission to change its own position regarding the disclosure of leniency applications for the purposes of damages actions before the national courts of the Member States.

It should be recalled that AG Jääskinen tried to carve out a truly significant exception for leniency applications not to be subjected to general rules on disclosure of evidence to potential damages claimants. In his opinion, he indicated that, on the one hand, and on the basis of the general requirements of the principle of effectiveness (effet utile) of EU law

51. […] subjecting access to public law competition judicial files to the consent of the infringer of the competition rules amounts to a significant deterrent of the exercise to a right to claim civil damages for breach of EU competition law. The Court has ruled that if an individual has been deterred from bringing legal proceedings in good time by the wrong-doer, the latter will not be entitled to rely on national procedural rules concerning time limits for bringing proceedings. I can see no reason for confining the application of this principle to limitation periods, and would advocate its extension to onerous rules of evidence that have an analogous deterrent effect. I would further query the compliance of remedies that deter enforcement of EU law rights with Article 19(1) TEU (footnotes omitted, emphasis added).

On the other hand, however, the AG considered that

55. Article 47 [of the Charter of Fundamental Rights] is also relevant to the case to hand because it guarantees the fairness of hearings, which serves to protect the interests of the undertakings that have participated in the cartel. In my opinion, access by third parties to voluntary self-incriminating statements made by a leniency applicant should not in principle be granted. The privilege against self-incrimination is long established in EU law, and it is directly opposable to national competition authorities that are implementing EU rules.

56. It is true that leniency programmes do not guarantee protection against claims for damages and that the privilege against self-incrimination does not apply in private law contexts. Despite this, both public policy reasons and fairness towards the party having given incriminating declarations within the context of a leniency programme weigh heavily against giving access to the court files of public law competition proceedings where the party benefiting from them has acted as a witness for the prosecuting competition authority (footnotes omitted, emphasis added). 

As I said, in my view, both positions are logically irreconcilable in that leniency applicants would have (by definition) prevented by their own unilateral will, access by third parties to the parts of the file that could be used to claim damages against them (something the AG rightly criticises at para. 51 of his Opinion).

In light of that debate, I think that the Donau Chemie Judgment should be welcome for the more balanced approach that the CJEU adopts:

39 […] in so far as the national legal measure or rule at issue in the main proceedings allows the parties to the main proceedings having infringed Article 101 TFEU the possibility of preventing persons allegedly adversely affected by the infringement of that provision from having access to the documents in question, without taking account of the fact that that access may be the only opportunity those persons have to obtain the evidence needed on which to base their claim for compensation, that rule is liable to make the exercise of the right to compensation which those persons derive from European Union law excessively difficult.

40 That interpretation is not called into question by the Austrian Government’s argument to the effect that such a rule is especially necessary in respect of documents lodged by parties in a file relating to proceedings under a leniency programme, in order to ensure the effectiveness of such a programme and therefore also that of the application of Article 101 TFEU.

41 Admittedly [...] Member States must not apply the rules on file access in such a manner as to undermine public interests such as the effectiveness of anti-infringement policies in the area of competition law.

42 The Court has recognised that leniency programmes are useful tools if efforts to uncover and bring an end to infringements of competition rules are to be effective and thus serve the objective of effective application of Articles 101 TFEU and 102 TFEU. The effectiveness of those programmes could be compromised if documents relating to leniency proceedings were disclosed to persons wishing to bring an action for damages. The view can reasonably be taken that a person involved in an infringement of competition law, faced with the possibility of such disclosure, would be deterred from taking the opportunity offered by such leniency programmes (C-360/09 Pfleiderer [2011] ECR I-5161, paragraphs 25 to 27).

43 It is clear, however, that although those considerations may justify a refusal to grant access to certain documents contained in the file of national competition proceedings, they do not necessarily mean that that access may be systematically refused, since any request for access to the documents in question must be assessed on a case-by-case basis, taking into account all the relevant factors in the case (see, to that effect, Pfleiderer, paragraph 31).

44 In the course of that assessment, it is for the national courts to appraise, firstly, the interest of the requesting party in obtaining access to those documents in order to prepare its action for damages, in particular in the light of other possibilities it may have.

45 Secondly, the national courts must take into consideration the actual harmful consequences which may result from such access having regard to public interests or the legitimate interests of other parties.

46 In particular, as regards the public interest of having effective leniency programmes referred to by the Austrian Government in the present case, it should be observed that, given the importance of actions for damages brought before national courts in ensuring the maintenance of effective competition in the European Union (see C‑453/99 Courage and Crehan [2001] ECR I‑6297, paragraph 27), the argument that there is a risk that access to evidence contained in a file in competition proceedings which is necessary as a basis for those actions may undermine the effectiveness of a leniency programme in which those documents were disclosed to the competent competition authority cannot justify a refusal to grant access to that evidence.

47 By contrast, the fact that such a refusal is liable to prevent those actions from being brought, by giving the undertakings concerned, who may have already benefited from immunity, at the very least partial, from pecuniary penalties, an opportunity also to circumvent their obligation to compensate for the harm resulting from the infringement of Article 101 TFEU, to the detriment of the injured parties, requires that refusal to be based on overriding reasons relating to the protection of the interest relied on and applicable to each document to which access is refused.

48 The mere risk that a given document may actually undermine the public interest relating to the effectiveness of the national leniency programme is liable to justify the non-disclosure of that document (C-536/11 at paras 39-48, emphasis added).

By rejecting the general criterion proposed by AG Jääskinen that leniency documents should in principle be protected from disclosure, the CJEU has preserved the potentiality for  damages actions to actually develop in the EU. 

However, the conditions under which the considerations regarding the circumstances in which the mere risk of disclosure of a specific document can be sufficient to prevent it on the basis that it could 'actually undermine the public interest relating to the effectiveness of the national leniency programme' (para 48) could have been explored in some more detail. A comparison of the English and the French, Spanish and Italian versions supports, in my view, the need for a very restrictive interpretation of this 'escape clause' created by the CJEU--which should only be applied under relatively extreme circumstances where the potential damage to the leniency system could be so great as to render it practically useless.

In view of the Donau Chemie Judgment, it may now be time for the European Commission to revise its own approach to the disclosure of leniency applications and to modify the policy adopted in the Notice on Cooperation with the National Courts, where it is clearly established that

the Commission may refuse to transmit information to national courts for overriding reasons relating to the need to safeguard the interests of the Community or to avoid any interference with its functioning and independence, in particular by jeopardising the accomplishment of the tasks entrusted to it(45). Therefore, the Commission will not transmit to national courts information voluntarily submitted by a leniency applicant without the consent of that applicant (para 26, emphasis added).

Such an absolute protection seems clearly at odds with the approach adopted by the CJEU and, consequently, a revision seems in order as a matter of institutional loyalty. Let's see how quickly it can take place... 

#CJEU incorrectly analyses 'State imputability' and gives green light to (pseudo)fiscal #Stateaid schemes (C-677/11)

In its Judgment of 30 May 2013 in case C-677/11 Doux Élevages and Coopérative agricole UKL-AREE  the Court of Justice of the European Union (CJEU) has carried on with its line of case law in C-345/02 Pearle and Others and stressed that, according to Art 107(1) TFEU, State aid cannot exist if the economic advantage under analysis is not funded by 'State resources' and there is no 'imputability to the State'.

In the case at hand CIDEF, a French agricultural inter-trade organisation (for poultry), introduced the levying of a 'cotisation volontaire obligatoire' (sic) (CVO) for the purposes of financing common activities decided on by that organisation. The contribution was initially introduced in 2007 as a voluntary measure for the members of CIDEF, but it was extended to all traders in the sector on a compulsory basis in 2009 by a tacit Ministerial decision to accept that extension (see press release).

Two complainants challenged the extension of the CVO on the basis that making it a mandatory payment for all traders in the sector (ie going beyond the group of members of CIDEF) involved State aid. The French Conseil d’État referred the matter to the CJEU for a preliminary ruling, which has decided that there is no element of State aid in the mandatory extension of the CVO to all traders in the industry concerned.

The reasoning of the CJEU indeed follows its previous line of case law in the area of State aid and adopts a very narrow approach to the concept of economic advantages 'granted by a Member State or through State resources'. On the point of the involvement of State resources, the CJEU finds that

the contributions [...] are made by private‑sector economic operators – whether members or non-members of the inter‑trade organisation involved – which are engaged in economic activity on the markets concerned. That mechanism does not involve any direct or indirect transfer of State resources, the sums provided by the payment of those contributions do not go through the State budget or through another public body and the State does not relinquish any resources, in whatever form (such as taxes, duties, charges and so on), which, under national legislation, should have been paid into the State budget. The contributions remain private in nature throughout their lifecycle and, in order to collect those contributions in the event of non‑payment, the inter-trade organisation must follow the normal civil or commercial judicial process, not having any State prerogatives (C-677/11 at para 32, emphasis added).

This should come as no big surprise, since this has become the standard position in the case law of the CJEU (ie that if the State 'does not touch' and 'should not have touched' the money, it cannot constitute a 'State resource'). However, one may wonder why the Court has not addressed the point of the (pseudo)fiscal nature of the imposition of a contribution (ie a levy) on undertakings that do not belong to the private organisation charging it. In the absence of a voluntarily established association (via membership), the prerogative of the inter-trade association to require payments from undertakings surely goes beyond the sphere of powers created by private law (taxation is one of the very exclusive powers of the State). In that regard, the reasoning followed by the CJEU on the point of 'imputability to the State' requires some close scrutiny. The Court finds that

35 […] Article 107(1) TFEU covers all the financial means by which the public authorities may actually support undertakings, irrespective of whether or not those means are permanent assets of the public sector. Therefore, even if the sums corresponding to the measure in question are not permanently held by the Treasury, the fact that they constantly remain under public control, and therefore available to the competent national authorities, is sufficient for them to be categorised as State resources (see [C‑482/99 France v Commission (2002) ECR I‑4397], paragraph 37 and the case-law cited).

36 In the case in the main proceedings, the conditions laid down by the Court in paragraph 37 of the judgment in France v Commission are not met. It is clear that the national authorities cannot actually use the resources resulting from the [CVOs] to support certain undertakings. It is the inter-trade organisation that decides how to use those resources, which are entirely dedicated to pursuing objectives determined by that organisation. Likewise, those resources are not constantly under public control and are not available to State authorities.

37 Any influence that the Member State may exercise over the functioning of the inter-trade organisation by means of its decision extending an inter-trade agreement to all traders in an industry is not capable of altering the findings made in paragraph 36 of this judgment.

38 It is clear from the case-file submitted to the Court that the legislation at issue in the main proceedings does not confer upon the competent authority the power to direct or influence the administration of the funds. Moreover, as the Advocate General noted in point 71 of his Opinion, according to the case-law of the competent national courts, the provisions of the Rural Code governing the extension of an agreement introducing the levying of contributions within an inter-trade organisation do not permit public authorities to exercise control over CVOs except to check their validity and lawfulness.

39 Regarding that control, it should be noted that Article L. 632-3 of the Rural Code does not permit making the extension of an agreement dependent upon the pursuit of political objectives which are specific, fixed and defined by the public authorities, given that that article non‑exhaustively lists the very general and varied objectives that an inter-trade agreement must promote in order to be capable of being extended by the competent administrative authority. That conclusion cannot be undermined by the obligation imposed by Article L. 632-8-I of that code to inform the authorities of the way in which CVOs have been used.

40 Moreover, there is nothing in the case-file submitted to the Court permitting it to consider that the initiative for imposing the CVOs originated with the public authorities rather than the inter-trade organisation. It is important to emphasise, as the Advocate General observed in point 90 of his Opinion, that the State was simply acting as a ‘vehicle’ in order to make the contributions introduced by the inter-trade organisations compulsory, for the purposes of pursuing the objectives established by those organisations.

41 Thus, neither the State’s power to recognise an inter-trade organisation under Article L. 632-1 of the Rural Code, nor the power of that State to extend an inter‑trade agreement to all the traders in an industry under Articles L. 632-3 and 632-4 of that code permit the conclusion that the activities carried out by the inter‑trade organisation are imputable to the State (sic) (C-677/11 at paras 35 to 41, emphasis added).

The reasoning followed by the CJEU could not be more puzzling, particularly at para 41, which to me seems plainly wrong. Given the literal tenor of Art 107(1) TFEU, which sets that the prohibition of State aid covers 'any aid granted by a Member State or through State resources in any form whatsoever' it is clear that the analysis of the 'imputability to the State' must cover the aid measure and not the activities of the beneficiary of such measure. 

Therefore, the conclusion reached in para 41 of C-677/11 is simply a non sequitur. After having recognised that 'the State was simply (sic) acting as a ‘vehicle’ in order to make the contributions introduced by the inter-trade organisations compulsory, for the purposes of pursuing the objectives established by those organisations' (para 40), it is an illogical step to conclude that such (vehicular) intervention is not imputable to the State. In my opinion, this plainly makes no sense.

The implications of the Judgment in Doux Élevages are likely to be far fetched, since they open the door to a floodgate of (pseudo)fiscal measures designed by Member States (by indirect influence to the relevant inter-trade or similar organisations, which should not be readily proven, see para 40 ab initio) to compensate for the stricter (?) controls on aid directly granted by public authorities. 

The only remaining hope at this point is that, under the relevant constitutional law of the Member States, such (pseudo)fiscal levies are considered unconstitutional limitations to the right to property, since the State is the only entity vested with powers to extract money payments not voluntarily accepted, at least as a general implication of the membership of an association (as was the case in Pearle, although any element of mandatory membership obviously would grant the same conclusion). And, consequently, this (pseudo)fiscal structure  that allows non-State entities to extract mandatory payments can be seen as an excessive restriction of the right to property under some Member States constitutional law (such as in Spain, for instance).

Maybe with the accession of the EU to the European Convention on Human Rights and a (stronger) duty to protect the right to property under Art 1 Protocol No. 1 ECHR (which includes rules on taxation not mentioned in the right to property recognised in Art 17 of the Charter of Fundamental Rights of the EU), the CJEU will need to revisit this line of case law.